Consumer Tips

How to Avoid a Tax Scam

With tax season here, the Internal Revenue Service is warning consumers to be aware of scams that could target your money or identity. Though tax scams are a problem all year, consumers can be especially vulnerable as they complete their paperwork to submit their taxes by April 17.

The warnings come as the IRS reported this week that incidents of tax-related identity thefts have declined. The IRS says the number of returns with confirmed identity theft fell to just under 600,000 in 2017 from nearly 884,000 the year before. 

"While the incidents of stolen identity refund fraud have gone down significantly, fraudsters are adaptive," says Kathy Pickering, vice president of regulatory affairs with the IRS.

Here are two scams you should be aware of and advice on how to protect yourself. 

'You're Under Arrest'

In this scam, you get a phone call from someone posing as an official from the IRS or a local law enforcement agency. The person tells you that you have an unpaid tax bill and threatens you with arrest, deportation, and suspension of your driver's license or business license or some other penalty unless you pay your bill immediately. He tells you to pay using your debit card (so the money is immediately withdrawn from your bank account), a gift card or by making a wire transfer. The caller may even "spoof" the caller-ID information that appears on your phone so it appears that the call is coming from a government agency.

In another phone-related scam, a fake IRS official calls students and tells them that they owe a “federal student tax”—a tax that doesn’t even exist. The caller threatens the student with arrest unless he immediately wires his payment.

What you should do. Hang up. The IRS will never call you to demand immediate payment and it will never threaten to arrest you for unpaid taxes. 

Also, don’t accept specific payment instructions. The IRS offers many payment methods and you can choose the one you want.

'We Need Your Social Security Number'

You receive an email that looks like a bill for unpaid taxes in connection with the Affordable Care Act. Or you may get an email that appears to come from the IRS Taxpayer Advocacy Panel telling you that it is sending you a refund. In both cases, the email asks for your Social Security number and bank account numbers to confirm your identity.

What you should do. Ignore IRS messages that come by email, text, or social media. The IRS does not use these forms of electronic communication to contact taxpayers. If you receive a message but you aren’t sure if it’s legitimate, don't respond or click on any links. Instead, contact the IRS at 800-829-1040.

How to Protect Yourself

The IRS suggests that you take the following steps to protect yourself from tax fraud.

File early. That way, if crooks get hold of your Social Security number, they won’t be able to use it to file a phony tax return and claim your refund—you’ll already have done that.

Use security software. Be sure you have an up-to-date anti-virus security program and a firewall installed on your computer or any device you're using to access sensitive documents or the IRS website. But also be on guard if someone calls you unexpectedly or you receive an email with a link to a software update. It could be from a scammer trying to trick you into downloading a data-stealing computer virus.

Protect your personal information. Don't routinely carry your Social Security card or leave sensitive information lying around. If you must provide your important data online, such as your Social Security number or a password, for example on a banking website, verify you're on a legitimate site and not a phished one made to look like the real thing. Make sure your tax records are in a secure place.

Contact the IRS if you think you've been scammed. Report the scam to the Treasury Inspector General for Tax Administration. The phone number is 800-366-4484.

You should also forward any emails that you think come from scammers to

Also, contact the IRS Identity Protection Specialized Unit if you believe someone has used your personal information to file a tax return or steal your identity. The phone number is 800-908-4490. 

Copyright© 2006-2018 Consumers Reports, Inc. of U.S., Inc. No reproduction, in whole or part, without written permission.

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