Tax scams: 15 IRS scams and tips for how to avoid them

Falling victim to a tax scam can have long-lasting consequences that impact your financial well-being.

By staying vigilant and learning how to spot and avoid tax scams, you can protect yourself from the devastating effects of fraud and identity theft.

In this guide, we’ll explore 15 of the most common tax scams to watch out for. From IRS impersonators to fraudulent payment requests, we’ll show you how to better avoid tax scams.

1. Illegitimate unemployment benefits

Illegitimate unemployment benefits scams are a type of federal tax scam that often begins with scammers acquiring sensitive information through means like data breaches, phishing emails, or fake apps. When cybercriminals steal enough personal information, including a Social Security number, they can submit fraudulent unemployment claims on behalf of unsuspecting victims, aiming to receive benefits illegally.

What scammers might say: "Hello, this is the IRS contacting you to confirm your details. We believe you may have been caught in a data breach. Please confirm your Social Security number and address to secure your data."

2. Unclaimed refund mail scams

Unclaimed refund mail scams are where criminals say you have an unclaimed tax refund awaiting you. These are delivered in a cardboard envelope by a delivery service. The letter includes the IRS masthead with a phone number and contact details that don’t belong to the IRS. If you provide personal details, you could fall victim to identity theft.

What scammers might say: "We’re contacting you in relation to your unclaimed refund. We need your personal information to finish processing it. Please call or email the contact details provided in this letter."

3. Employee retention credit scam

This is when third-party promoters advertise their services or send direct mail campaigns about the Employee Retention Tax Credit (ERTC). In this scam, fraudsters exaggerate who qualifies for the credit and charge upfront fees for claiming it for you. If you aren’t eligible, you will end up having to pay the credit back and won’t get your fees back. Before applying, check the ERTC requirements.

What scammers might say: "We’re writing to inform you that you qualify for the Employee Retention Tax Credit. If you would like us to process this for you, simply pay the fee below."

4. W-2 form phishing scam

The W-2 phishing scam is when scammers try to get employees’ W-2 forms from HR staff or the finance department. They usually do this by pretending to be someone senior in the organization, like the CEO or CFO.

What scammers might say: "It’s Greg, I need everyone’s W-2s ASAP in one file. We’re being investigated by the IRS and I need to assure them all the forms were completed correctly."

5. Tax-deductible charity fraud

This type of charity scam happens when criminals scam money from well-intentioned people by posing as legitimate charities. If you send them money, your funds won’t help your intended cause and you won’t be able to deduct your donation on your tax return because the money didn’t go to a registered charity.

What scammers might say: "Make a tax-deductible donation to our charity and receive generous tax benefits while helping people in need.”

6. “Ghost” tax return scam

In this scam, unethical tax return preparers, or “ghost preparers,” don’t sign the tax returns they prepare. They will usually charge you fees based on the size of the refund you receive. But you could end up in trouble thanks to bogus deductions and other shifty practices to inflate your refund—and their commission.

What scammers might say: "As professional tax preparers, we guarantee we can double your refund. And for your convenience, we manage everything online."

7. Natural disaster relief fund tax scam

Disaster relief fund tax scams capitalize on the aftermath of catastrophic events by claiming to assist affected communities. Scammers may masquerade as government agencies who promise financial aid to those impacted by a natural disaster. These fraudulent schemes aim to deceive victims into providing personal information online or paying into non-existent relief funds.

What scammers might say: “Support disaster relief efforts by donating to our local fund for survivors. For a fast donation, pay with a cash app or in gift cards.”

8. Tax consultant fraud

Individuals or firms may pose as knowledgeable tax professionals or tax preparers offering services to assist you with your tax obligations. These fake tax consultants may promise to minimize tax liabilities or maximize refunds. You could then face audits, penalties, or legal actions due to inaccurate filings or unlawful tax avoidance. Or the scammer might direct your refund to their account.

What scammers might say: ​​"Hello, I'm a tax consultant offering exclusive services to minimize your tax liabilities and maximize your refunds. Just provide your personal and financial information, and I'll handle the rest."

9. Gift card tax scam

This form of gift card scam is common around the holiday season and usually begins with a scammer asking you to pay a fake tax bill with gift cards. The most common way that con artists request gift cards is over the phone but they also use text messages, emails, or social media.

What scammers might say: "We're calling from the IRS, and you owe back taxes. To avoid arrest, purchase $200 in gift cards and provide the codes for immediate payment."

10. Tax refund recalculation scam

In the refund recalculation scam, criminals will contact you to say that they recalculated your IRS refund and you are due more money. The message may ask you to click a link. When you do, it will reroute to a scam or spoofed web page that asks for and steals your bank account information.

What scammers might say: "We’ve recalculated your tax refund and need your bank details to return the difference. Please enter your bank account information to expedite the process."

11. Stimulus payment scam

The stimulus payment scam might ask you to click a link to receive a payment by taking you to a page requesting personal and financial information. Remember, the IRS will never initially contact you through email or text message and will never ask you to enter personal data. Since you don’t have to pay a fee to receive a stimulus check, scammers are ultimately trying to steal your identity or money.

What scammers might say: "To claim your stimulus payment, provide your Social Security number and pay a small processing fee. Act fast to ensure you don't miss out on this opportunity."

Scammers can use your personal details fraudulently. Use an identity theft protection service like LifeLock Standard to get alerts if a scammer is detected using your Social Security number or personal info in applications for credit or other financial services. Subscribe now and help protect against identity fraud.

12. Tax lien scam

In this tax scam, cybercriminals pose as a fake agency with a convincing name like the “Bureau of Tax Enforcement,” threatening you with an IRS lien or levy. The scam is run by mail. If you don’t owe taxes you should scan the letter and send it to phishing@irs.gov. If you’re not sure whether you owe taxes, you can confirm the letter by calling the IRS at 800-829-1040.

What scammers might say: "To avoid a federal tax lien, pay your tax debt in full now."

13. Tax evasion police scam

A scammer may impersonate law enforcement officers, claiming to represent the tax authorities and accusing you of tax evasion. They use tactics like threats of arrest, imprisonment, deportation, or imminent legal action. If you comply with their demands, it could lead to a long road to recovery from identity theft.

What scammers might say: "This is Officer Smith from the IRS Criminal Investigation Unit. You're under investigation for tax evasion, and a warrant will be issued for your arrest unless you settle your outstanding tax debt immediately."

14. IRS debt collection scam

The IRS debt collection scam happens when criminals pose as the IRS and claim that you owe back taxes, penalties, or interest, and insist that failure to pay will result in severe consequences. These fraudsters may manipulate caller ID to display the IRS's number. They may also request payment methods like Zelle, which the IRS would never accept.

What scammers might say: "Hello, this is the IRS calling to inform you that you have an outstanding tax debt. Failure to settle immediately will result in legal action, including arrest or asset seizure."

15. Offer in Compromise scam

An Offer in Compromise (OIC) tax scam tricks you into paying upfront fees with the promise of settling your tax debt for less than the full amount. The IRS offers legitimate OIC programs, but scammers exaggerate your chances of qualifying and pocket your money without helping you negotiate with the IRS.

What scammers might say: "You owe the IRS money and they are preparing to seize your assets. Let us help you eliminate 100% of your tax debt for pennies on the dollar.”

How to spot tax scams

Identifying tax fraud is crucial for protecting yourself and your finances.

Here are ten key ways to spot tax scams and help avoid falling victim to fraudulent schemes.

• Unsolicited communication: Be wary of unsolicited phone calls or emails claiming to be from the IRS.
  
• Pressure tactics: Scammers often use pressure tactics, such as threats of arrest or immediate action, to intimidate victims into providing personal information or making payments.
• Request for payment: The IRS will never demand immediate payment or request payment via methods like gift cards.
• Phony email requests: Be cautious of emails claiming to be from the IRS and avoid clicking any links or opening attachments. The IRS will never request personal information over email.
• Fraudulent text messages: The IRS doesn’t contact taxpayers via text message for personal or financial information.
• Social media outreach: The IRS doesn’t initiate contact via social media apps like Instagram or Facebook for personal or financial information.
• Unofficial tax forms: Verify the legitimacy of IRS forms and notices by checking the official IRS website or contacting the IRS directly.
• Fake IRS credentials: If someone calls you out of the blue claiming to be from the IRS, it’s a scam. An IRS employee will never call you without sending a letter or bill in the mail first and will never demand immediate payment.
• Untraceable payment methods: The IRS offers different ways to pay but doesn’t accept payment via gift cards or cash apps.
• Threats and intimidation: The IRS cannot revoke a driver’s license, business license, or immigration status, and will not make such a threat.

Always remember to verify the legitimacy of any communication claiming to be from the IRS and never hesitate to report suspicious activity to the appropriate authorities.

Want to help avoid tax scam ID theft?

Help protect your personal information in the event that it’s stolen with an ID theft monitoring service like LifeLock Standard. With features such as credit monitoring, identity alerts, and restoration services, a LifeLock membership will help protect against identity fraud and help you handle things if it happens to you.

FAQs about tax scams

Still have questions about tax scams? We’ve got you covered.

What are the warning signs of tax scams?

Warning signs of tax scams can include unsolicited demands of immediate payment, threats of arrest or legal action, and requests for payment via gift cards or other non-authorized IRS payment methods.

How do I know if I got scammed on my taxes?

You may have been scammed on your taxes if you discover unauthorized transactions, receive notices from the IRS about unreported income, or are sent records of a duplicate tax return.

How will the IRS contact you?

The IRS primarily contacts taxpayers by mail. They may contact you by phone after sending a bill in the mail, but they will never demand immediate payment or threaten legal action.

What do I do if I become a victim of IRS tax scams?

If you are a victim of an IRS scam, report the tax scam to the IRS, freeze your credit report, and review your credit accounts for suspicious activity. Reporting IRS tax scams can help prevent others from falling victim and possibly bring the scammers to justice.

What was the COVID-19 relief fund tax scam?

The COVID-19 relief fund tax scam took advantage of individuals and businesses in a crisis. Exploiting government aid and relief programs, scammers posed as official entities offering assistance to those affected by the pandemic. They promised financial aid or tax relief but aimed to deceive victims into disclosing personal information.