Home > Identity Theft > The Tax Scams That Could Cost You Your Refund

Comments 0 Comments

You may dread tax season, but scammers love it. From stealing people’s personal information to trying to pull the wool over the eyes of the Internal Revenue Service, some people go to extraordinary lengths to make money by cheating the tax system.

In a recent post to its website, the IRS listed its Dirty Dozen Tax Scams, 12 of the most common ways fraudsters try to profit from or evade taxation. Many of the scams are predatory, meaning consumers need to watch out for people trying to steal their personal information or capitalize on confusion surrounding tax filings.

A familiar foe tops the list.

Identity Theft

Tax fraud is the most common form of identity theft, and identity theft is one of the biggest tax-fraud tactics out there.

Sometimes there’s not much you can do. If you have no idea your Social Security number has been compromised, you may not find out someone has filed for a refund under your name until it’s too late, and at that point, it’s up to you to act quickly to minimize the negative impact from the fraud.

If you have reason to believe your personal information has been compromised and may be used by a thief to file a fraudulent tax return, contact the IRS Identity Protection Specialized Unit (800-908-4490).

Identity theft can make a mess of your credit, but your credit report and scores can help you spot fraudulent activity. By comparing your credit score from month to month (make sure you’re comparing the same scoring model), you’ll be able to notice a sudden change in points, which may indicate fraud. You can use the Credit.com Credit Report Card to monitor two of your credit scores every month for free.

Phone Scams

These people call claiming to be the IRS, and they can be convincing and intimidating. The caller ID may say it’s the IRS on the line, but that can be faked. The scammer may provide a bogus IRS badge number, and the person on the other line may even have the last four digits of your Social Security number.

Bottom line: Do not give any personal information over the phone to someone claiming to be from the IRS. Scammers may turn hostile, threatening you with jail time or other consequences, but you should address any questions about paying taxes by calling the IRS: 800-829-1040. It’s sort of a “don’t call me, I’ll call you” philosophy — take up any tax issues by making the contact yourself.


The same goes for email. It’s simple: The IRS will never initiate contact with you about tax payments via email. Scams appear legitimate, but you should never provide sensitive information over email, let alone all the information someone would need to fraudulently file a tax return in your name.

False Promises

If you see an offer from someone claiming they’ll prepare your taxes so you get a HUGE refund, proceed with caution.

It’s understandable you would be drawn to someone who says they can help you maximize your tax refund, and that’s exactly why fraudsters take this approach, targeting low-income, elderly or non-English-speaking people.

The IRS reminds consumers that honest tax preparers give customers a copy of the return they’ve prepared, which scammers often do not do.

“Victims also report that the fraudulent refund is deposited into the scammer’s bank account,” the post says. “The scammers deduct a large ‘fee’ before cutting a check to the victim, a practice not used by legitimate tax preparers.”

Preparer Fraud

On that topic, if you’re having someone else help you prepare your tax return, make sure you trust their abilities. No matter who prepares your tax return, you are legally responsible for what’s on it.

Repeat: You are held accountable for what’s on your tax documents, even if you didn’t fill out a single form yourself. Tax fraud is illegal and carries some steep penalties, so don’t take tax preparation lightly.

In short, if someone is offering you a massive refund in exchange for pricey tax-preparation services, beware.

Charity Scams

This is a year-round advisory: Charitable donations are a great way to save money on your taxes, and after major disasters, false charities pop up to take your well-intentioned money. Come time for filing your taxes, you’ll be out your donation and the deduction you wanted to claim from it.

When donating money to the cause of your choice, make sure the charity is legitimate. Unfortunately, there are a lot of scammers out there who try to turn a profit by riding the coattails of death and destruction.

Being aware of these scams should help you avoid getting duped, but you should also know not to cook the books on your own. Rounding out the dirty dozen, the IRS highlighted several consumer tax tactics that will get you in trouble, including offshore accounts, falsely claiming zero wages and false income, exemptions and deductions.

More on Identity Theft:

Image: iStock

Comments on articles and responses to those comments are not provided or commissioned by a bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by a bank advertiser. It is not a bank advertiser's responsibility to ensure all posts and/or questions are answered.

Please note that our comments are moderated, so it may take a little time before you see them on the page. Thanks for your patience.

Credit.com receives compensation for the financial products and services advertised on this site if our users apply for and sign up for any of them.

Hello, Reader!

Thanks for checking out Credit.com. We hope you find the site and the journalism we produce useful. We wanted to take some time to tell you a bit about ourselves.

Our People

The Credit.com editorial team is staffed by a team of editors and reporters, each with many years of financial reporting experience. We’ve worked for places like the New York Times, American Banker, Frontline, TheStreet.com, Business Insider, ABC News, NBC News, CNBC and many others. We also employ a few freelancers and more than 50 contributors (these are typically subject matter experts from the worlds of finance, academia, politics, business and elsewhere).

Our Reporting

We take great pains to ensure that the articles, video and graphics you see on Credit.com are thoroughly reported and fact-checked. Each story is read by two separate editors, and we adhere to the highest editorial standards. We’re not perfect, however, and if you see something that you think is wrong, please email us at editorial team [at] credit [dot] com,

The Credit.com editorial team is committed to providing our readers and viewers with sound, well-reported and understandable information designed to inform and empower. We won’t tell you what to do. We will, however, do our best to explain the consequences of various actions, thereby arming you with the information you need to make decisions that are in your best interests. We also write about things relating to money and finance we think are interesting and want to share.

In addition to appearing on Credit.com, our articles are syndicated to dozens of other news sites. We have more than 100 partners, including MSN, ABC News, CBS News, Yahoo, Marketwatch, Scripps, Money Magazine and many others. This network operates similarly to the Associated Press or Reuters, except we focus almost exclusively on issues relating to personal finance. These are not advertorial or paid placements, rather we provide these articles to our partners in most cases for free. These relationships create more awareness of Credit.com in general and they result in more traffic to us as well.

Our Business Model

Credit.com’s journalism is largely supported by an e-commerce business model. Rather than rely on revenue from display ad impressions, Credit.com maintains a financial marketplace separate from its editorial pages. When someone navigates to those pages, and applies for a credit card, for example, Credit.com will get paid what is essentially a finder’s fee if that person ends up getting the card. That doesn’t mean, however, that our editorial decisions are informed by the products available in our marketplace. The editorial team chooses what to write about and how to write about it independently of the decisions and priorities of the business side of the company. In fact, we maintain a strict and important firewall between the editorial and business departments. Our mission as journalists is to serve the reader, not the advertiser. In that sense, we are no different from any other news organization that is supported by ad revenue.

Visitors to Credit.com are also able to register for a free Credit.com account, which gives them access to a tool called The Credit Report Card. This tool provides users with two free credit scores and a breakdown of the information in their Experian credit report, updated twice monthly. Again, this tool is entirely free, and we mention that frequently in our articles, because we think that it’s a good thing for users to have access to data like this. Separate from its educational value, there is also a business angle to the Credit Report Card. Registered users can be matched with products and services for which they are most likely to qualify. In other words, if you register and you find that your credit is less than stellar, Credit.com won’t recommend a high-end platinum credit card that requires an excellent credit score You’d likely get rejected, and that’s no good for you or Credit.com. You’d be no closer to getting a product you need, there’d be a wasted inquiry on your credit report, and Credit.com wouldn’t get paid. These are essentially what are commonly referred to as "targeted ads" in the world of the Internet. Despite all of this, however, even if you never apply for any product, the Credit Report Card will remain free, and none of this will impact how the editorial team reports on credit and credit scores.

Your Stories

Lastly, much of what we do is informed by our own experiences as well as the experiences of our readers. We want to tell your stories if you’re interested in sharing them. Please email us at story ideas [at] credit [dot] com with ideas or visit us on Facebook or Twitter.

Thanks for stopping by.

- The Credit.com Editorial Team