Tax Scams You Can Avoid

Recognizing the warning signs of a scam can help protect your finances.

By Navy Federal January 5, 2016

Tax season can be taxing enough without additional pressure from fraudsters, but unfortunately, these scams often peak during tax-filing season. The IRS recommends you keep an eye out for:

Additional disability compensation scams. An email targeting military members that appears to come from Defense Finance and Accounting Services and displays a ".mil" email address. The email may state that if you receive disability compensation from Veterans Affairs (VA), you may be able to obtain additional funds from the IRS. You're asked to send VA or IRS documents containing personal and financial information. This information is used by scammers to commit identity theft.

Protect yourself: Never respond to an email by sending personal and financial information unless you initiated the contact and are sure who you're dealing with. Also, never–ever–send sensitive information through unsecured email.

Tax identity theft. Someone files a fake tax return using your Social Security Number and/or other personal information to get a refund or a job. You may find out about it when you receive a letter from the IRS saying that more than one tax return was filed in your name or that IRS records show wages from an employer you don't know.

Protect yourself: Don't carry your Social Security Number or any documents that include it. Keep your Social Security card and anything that displays the number in a secure place. Don't give your Social Security Number to a business just because they ask for it—there should be a legitimate need.

Telephone scams. A caller claiming to be from the IRS says you owe money or are entitled to a huge refund. Or, they may threaten arrest or revocation of your business or driver's license with follow-up calls claiming to be from the police department or motor vehicle department. Scammers use fake names and IRS badge numbers, and your caller ID may make it appear that the IRS is calling. The caller may know the last four digits of your Social Security Number, and you may receive a bogus email to support the bogus call.

Protect yourself: It pays to double check claims you receive by phone. Call the IRS at 800-829-1040 to speak with an IRS employee who can help you with a payment issue or confirm refund details.

Phishing scams. These scams use an unsolicited email or fake website to lure you in and prompt you to provide personal and financial information that can be used for financial or identity theft. The email may appear to be from the IRS or a closely linked organization, such as the Electronic Federal Tax Payment System.

Protect yourself: Remember that the IRS does not initiate contact with taxpayers by email to request personal or financial information. This includes any type of electronic communication, such as text messages and social media channels.

False promises of inflated refunds. Scam artists may pose as tax preparers promising large federal tax refunds or refunds that you never dreamed were due to you in the first place. They often prey on people who don’t have to file a return, such as low-income individuals, older adults and non-English speakers. They charge good money for very bad advice. Or worse, they file a false return in your name, and you never know that a refund was paid.

Protect yourself: Take care when choosing an individual or firm to prepare your taxes.

Honest return preparers generally:

  • ask for proof of income and eligibility for credits and deductions.
  • sign returns as the preparer.
  • enter their IRS Preparer Tax Identification Number (PTIN).
  • provide you with a copy of the return.

This article is intended to provide general information and shouldn't be considered legal, tax or financial advice. It's always a good idea to consult a tax or financial advisor for specific information on how certain laws apply to your situation and about your individual financial situation.