Get ready. Tax season is looming, and with it comes the ominous threat of tax scams. It’s a familiar tale: each year, both individuals and business owners fall prey to these schemes, leading to significant financial losses and the exposure of sensitive personal information. Shockingly, the Better Business Bureau reports that in 2022 alone, taxpayers suffered a staggering $5.7 billion in losses due to tax scams and fraud. In today’s article, we’re uncovering the top scams you must be vigilant about to avoid becoming the next target of these cunning scammers. Stay informed to safeguard yourself against their tactics.
#1 Tax Scam Protection – Know the IRS Contact Methods
One way to lower your chances of falling for tax scams is to know how the IRS might contact you. The IRS’s main method of communication is physical mail. However, if they’re unable to reach you via mail, they may initiate a phone call. If this is the case, they will still try not to solicit any personal or financial information over the phone and they will never threaten you or demand payment.
If you receive a message through email, text messages or social media platforms, exercise caution and follow these steps:
- Be skeptical of unsolicited emails or texts requesting sensitive information.
- Verify the authenticity of any communication before responding.
- Avoid clicking on suspicious links or downloading attachments from unknown sources.
Want more information? Check out this article to help you figure out if it’s really the IRS contacting you.
Top Scams to Beware of This Tax Season
Employee Retention Credit (ERC) Tax Scams
This scam is one every small business needs to know about. The ERC is a refundable tax credit against certain employment taxes. While the credit is real, aggressive promoters are misrepresenting and exaggerating who can qualify for the credit. They often target ineligible organizations, with a goal of:
- Charging large upfront fees, and/or;
- Collecting personally identifiable information that they can later use for identity theft.
The IRS and tax professionals continue to see aggressive broadcast advertising, direct mail solicitations and online promotions involving the ERC. This has led the IRS to issue many warnings about ERC schemes from third-party promoters. Businesses, tax-exempt organizations and others thinking about applying for the ERC need to carefully review the official requirements for this credit before they claim it. Remember, if a tax deal sounds too good to be true, it probably is.
The “Impact Payment” Scam
As you prepare to collect the required documents for filing your 2023 return, be aware of a new online scam circulating. This scheme involves an e-mail displaying the IRS logo and addressing the “third round of economic impact payments,” deeming it an “important matter concerning your recent tax return filing.”
The e-mail asserts that certain inconsistencies or missing information have been identified and assures recipients that a refund of $976 awaits them upon submission of the required document. Notably, there’s a button labeled “complete my information,” but IRS Media Relations Specialist Robert Marvin urges you not to click it.
Unclaimed Refund Tax Scams
Another one that sounds too good to be true is the “unclaimed refund available” scam. The IRS issued a warning about this new scam last summer. The new scheme involves a mailing that comes in a cardboard envelope from a delivery service. The enclosed letter includes the IRS masthead and wording that the notice is “in relation to your unclaimed refund.”
Similar to many scams, the deceptive letter provides contact information and a phone number that is in no way affiliated with the IRS. What sets this scheme apart is its request for various sensitive personal information from taxpayers, including detailed images of driver’s licenses. Identity thieves seeking to get ahold of tax refunds and other confidential financial data can exploit such information.
Identity Theft
If cybercriminals are able to get access to your personal information, they can file a fake tax return on your behalf and potentially collect a refund payment. The IRS recently shared that more than 1 million tax returns were flagged last year for possible identity theft.
One tool to prevent tax ID theft is to apply for an Identity Protection PIN from the IRS before you file your return. It’s also good to file early before criminals have a chance, and if you get a notice about an alleged “duplicate tax return” or a notice saying that additional taxes are owed, contact the IRS directly as soon as possible.
Be Smart And Protect Yourself
The tax season often sees a surge in scams, but with some vigilance identifying an IRS imposter and protecting your finances and sensitive data becomes possible.
To enhance protection and mitigate the risk of identity theft, it is recommended to file your taxes early. Early filing reduces the window for scammers to impersonate you. When hiring a tax preparer, conduct thorough vetting and be wary of those promising substantial refunds without prior access to your information. For an added layer of security and peace of mind, explore a fraud protection service.
Cybercriminals never take a break. Tax scams are only one way they’re trying to steal your information and money. It’s important to have a full cyber security system in place to make sure your organization is protected at every possible entry point. We recommend getting a FREE third-party security assessment. Our experts will examine your entire network for vulnerabilities and help you map out a plan to fix them. In all the years we’ve been doing this, we’ve always found something.
To schedule your no-obligation assessment for your peace of mind, click here.