You’ve got a refund! And other IRS scams
The most common tax scams and their telltale signs
Our favorite time of the year has come and the Internal Revenue Service (IRS) is breathing down our necks. It’s also a perfect time for fraudsters to steal our sweet tax refunds. In 2023, the IRS investigated 87,591 fraud cases with $1.2 billion in fraudulent refunds and flagged 2.4 million tax returns worth $13.8 billion for suspicion of identity theft.
The majority of IRS scams start with someone impersonating an IRS agent and demanding to provide money or information. Fraudsters also urge victims to act immediately out of fear of punishment or losing money. Here are a few examples of IRS scams that are most common in 2024.
Six Most Common IRS Scams and Their Telltale Signs
1. Unclaimed Refunds
Victims receive letters or emails from “IRS” reporting that they have an unclaimed refund or they need to recalculate the tax payment amount. To receive the refund, they must upload their IDs, and provide personal information, and bank credentials. The stolen data will be sold or used in identity fraud, claimed tax refunds, and other crimes. In another variation, the provided link will contain malware and will be used to steal the victim’s money.
2. Charity Fraud
Fake charities and non-profits often promise that donations can be claimed as deductions on donors’ tax returns to make people more generous. Money gets stolen, and the victims may be penalized for providing wrong information to the IRS.
3. IRS Money Demands
Victims receive phone calls from fake IRS agents notifying them about taxes or fees that they owe. They urge victims to pay immediately to avoid punishment. The fraudsters’ signature move is hostility, they may threaten with police, prison time, or deportation. Some of them may claim that a victim’s tax refund was sent by mistake and demand to send money back immediately.
4. Dirty Accountants
Fraudsters file taxes for other people using fake tax credits and redirect victims’ refunds to their accounts. A big case with hundreds of victims happened in Iowa in 2018-2022. The fraudsters targeted immigrants who worked in local meat-packing facilities, spoke little English, and didn’t know what a tax return was. The fraudsters took fees from their customers, increased refunds by claiming fake tax credits, and redirected partial or full refunds to the accounts. They filed 1,600 tax declarations and stole $100,000 in unemployment benefits that were claimed without victims’ knowledge.
Ghost tax preparers pretend to file declarations, and collect fees, and victims are left with penalties from the IRS for not providing tax information on time. The U.S. Department of Justice keeps a list of prosecuted tax preparers and advises to check it before filing taxes with a new accountant.
5. Employee Retention Credit Scam
The Employee Retention Credit is a tax break established during the pandemic to help struggling businesses. Fraudsters encourage business owners to apply for the tax credit even if these organizations don’t qualify and charge them exorbitant fees for help with the applications. They often claim that it’s a very fast and easy process and urge victims to file as soon as possible to meet the deadline.
6. Stolen Identity/Documents Cancellations
Victims receive calls from fake IRS agents who claim that their identities were stolen or that their Social Security Numbers or IDs were suspended for unpaid taxes. To remedy this, victims have to provide money, and because their identity is stolen, they can’t use traditional banking methods and have to buy gift cards or prepaid bank cards. They give the card numbers to the scammers and never hear from them again.
If you are a victim of the IRS scams, you need to contact the Treasury Inspector General for Tax Administration and the Federal Trade Commission to report the crime.
