Reader’s Digest | Before You File Your Taxes, Make Sure You’re Not Falling for One of These Sneaky Tax Scams

Who do fraudsters target with tax scams?

Scammers target anyone they think they can separate from their money and personal information, but David Trapp, the CEO of cybersecurity company ArmorPoint, told us that two groups are more vulnerable than others: Baby Boomers and Gen Z.

Trapp explains that older adults are less savvy to scammers and more likely to believe the IRS is actually calling them to verify their banking information. “They might not understand that this is in fact a phishing attempt from a scam artist and not a legitimate employee trying to help them,” he says.

On the other end of the spectrum, bad actors prey on young adults who might be filing taxes for the first time. “Younger generations are also using technology for their finances, which can lead to accidental data leaks or hackings—for example, asking ChatGPT a question on how to fill out a W-2 form and accidentally exposing their SSN [Social Security number], home address or earnings information,” Trapp says.

What scams might you encounter as you prep your taxes?

As you prep your taxes, keep in mind that fraud comes in many forms. Con artists are clever, and they keep changing the game to trick you into divulging your most private information. “Tax scammers are getting surgical,” Sabaj says. “They’re using breached data and convincing IRS look-alike messages to phish you before you even file.”

Read on for the tax scams you’re most likely to encounter while filing this season.

Stolen identity scam

Plenty of scams can give bad actors everything they need to steal your identity. But in this one—the most common form of tax fraud—a scammer steals your identity, files a tax return on your behalf and gets your refund.

How to recognize it

“This scam can be recognized by the taxpayer if they attempt to file their return and it gets turned away because they had already filed,” explains Nathan Goldman, professor of accounting at North Carolina State University’s Poole College of Management.

How to avoid it

Goldman says that the best way to avoid the stolen identity scam is to protect your identity and passwords. “Beyond that, filing early [before any potential fraudsters attempt to file] can cut off this opportunity,” he says.

IRS impersonation scam

In this scam, fraudsters pose as IRS representatives. Kinglsey says these bad actors will call you, demand immediate payments—sometimes for previous years’ returns—and threaten law enforcement action or suspension of benefits if the payment isn’t made.

How to recognize it

“Government agencies, like the IRS, will not call you to demand urgent action or threaten you. In most instances, they communicate via mail,” Kingsley says, adding that you can verify a piece of mail is from the IRS by searching for a letter or notice online. Just head to the IRS Notices & Letters Search function to check if yours is legit.

How to avoid it

Kingsley is clear about what to do if you get a call like this: “If you receive a call from someone claiming to be the IRS, a government agency or law enforcement, hang up.” Look up the official number for that agency and call them back directly. “Never rely on a number provided by the caller,” he says.

Tax preparer scam

The tax preparer scam involves bad actors posing as representatives of tax service companies. Kingsley says they’ll offer to help you prepare to file taxes in order to gain access to sensitive personal information, which gives them what they need to dupe you out of money.

How to recognize it

If someone contacts you and promises a bigger, faster tax return, they may be trying to scam you. Always remember that if something sounds too good to be true, it probably is.

How to avoid it

You can avoid the tax preparer scam by researching and vetting legitimate tax preparers. If you want to be even safer, Kingsley suggests seeking referrals from friends and family to ensure you are picking a trusted service. “Always look up your provider before paying for services or providing them with personal information to avoid ‘ghost preparers,’” he says. And if you encounter someone you suspect is a phony? Just say no to working with them.

Social media tax hacks scam

Social media platforms like TikTok and Instagram offer hacks for everything, but when it comes to your taxes, you want to be honest. Avoid advice spouted by influencers who might offer a corner-cutting hack or strategy for a smaller tax payment.

How to recognize it

Social media scams are easy to recognize: If an influencer is telling you how to pay less to the IRS, look away—or at least run the deduction by a verified accountant. “Legitimate tax strategies focus on allowable deductions and compliance with tax law, not shortcuts built around questionable credits,” says Terri Luttrell, the compliance and engagement director at Abrigo, a software company that helps prevent financial crime.

How to avoid it

Tax hacks circulating on platforms like TikTok, Instagram and Facebook often promote fabricated strategies to inflate refunds, such as inventing household employees or submitting false W-2 information. “The IRS has warned that these schemes can lead to rejected returns, penalties and increased audit scrutiny,” Luttrell says.

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To see the full article featuring Abrigo, visit Reader’s Digest, “Before You File Your Taxes, Make Sure You’re Not Falling for One of These Sneaky Tax Scams.”