How to Protect Yourself from Tax Scams

By FINRA Investor Education Foundation Staff

No one wants to pay more tax than they owe, and no one wants to be scammed out of their hard-earned money. So, what can you do to protect yourself from tax and other scams that propagate this time of year?

First, recognize how the IRS operates. Note that the Internal Revenue Service (IRS) will never:

  • call to demand immediate payment using a specific payment method such as a prepaid debit card, gift card or wire transfer (generally, the IRS will first mail you a bill if you owe any taxes);

  • threaten to immediately bring in local police or other law-enforcement groups to have you arrested for not paying;

  • demand that you pay taxes without giving you the opportunity to question or appeal the amount they say you owe; and

  • ask for credit or debit card numbers over the phone.

Second, if you get such a call and know that you don’t owe taxes, or have no reason to think that you do, then:

  • do not give out any information to anyone claiming to be from the IRS—hang up immediately;

  • contact the Treasury Inspector General for Tax Administration (TIGTA) to report the call via their IRS Impersonation Scam Reporting web page or at (800) 366-4484; and

  • report it to the Federal Trade Commission via the FTC Complaint Assistant (be sure to add "IRS Telephone Scam" in the notes).

Third, do not respond to emails that offer to update your IRS e-files or advocate for you as part of the Taxpayer Advocacy Panel (TAP). Any such emails are phishing scams. The IRS regularly reminds people that it never initiates contact with taxpayers electronically, including through email, text or social media. Similarly, although TAP is a real organization that advises the IRS on tax issues, they do not have access to taxpayer email addresses. Scammers use these and other techniques in an attempt to get you to divulge private information they can use to access your records. Delete these emails, or forward them to This email address is being protected from spambots. You need JavaScript enabled to view it.. Never click on any attachment or links contained in these emails. Doing so can download malicious code onto your computer, leaving your personal information vulnerable to attack.

Next, file early to limit the possibility that an identify thief will file your return—and claim your refund, if you are eligible for one—before you do. In an effort to combat tax refund fraud, Congress passed a law in 2015 that prohibits the IRS from processing refunds before February 15, 2017 for 2016 tax filings that claim the Earned Income Tax Credit (EITC) or Additional Child Tax Credit (ACTC). If you claim these credits and are expecting money back, don’t plan on an early tax refund before mid-February. But this doesn’t mean you should wait to file until then. File as you normally would, then check the “Where’s My Refund” tool on IRS.gov on or after February 15 to get the most up-to-date information on the status and timing of your refund. And remember, the fastest and safest way to receive your refund is by direct deposit. 

Finally, know your rights. The IRS publishes its Taxpayer Bill of Rights to inform citizens of their rights and responsibilities under the tax code. Don’t pay attention to frivolous claims made by tax cheats about how to avoid paying your fair share of tax. The courts have settled these cases, and the decisions are available to the public.

To keep up with the latest scams, visit the Tax Scams/Consumer Alerts section of the IRS website. For more information about avoiding investment fraud, visit SaveAndInvest.org.

 

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