It’s Tax (Scam) Time

Tax filing time is rapidly approaching here in the USA – which means tax scams are here, too. Let’s review some top tips for avoiding these scams. (While much of this article is focused on the United States, many of the same principles will apply globally.)

Identifying Tax Scams

Most scams have two key elements: they’re scary and they’re urgent. Something really bad is going to happen or has happened, and you need to acti right now to avoid it or fix it – or things will get even worse. They don’t want you to have time to think – just act. Fake IRS emails, phone calls and text messages will say that you’ve done something horribly wrong and owe lots of money. You must immediately send them money or face additional fines, jail time, etc. Others will tell you that you have to click a link or call someone to collect your tax refund. These are scams. This is not how the IRS operates. Specifically, the IRS will never:

• Contact you by email, text message, or social media to get your personal or financial information.
• Call to demand immediate payment using a specific method such as a prepaid debit card, gift card or wire transfer. The IRS does not use these methods for tax payments.
• Threaten to immediately bring in local police or other law-enforcement groups to have the taxpayer arrested for not paying.
• Demand that taxes be paid without giving the taxpayer the opportunity to question or appeal the amount owed.
• Ask for credit or debit card numbers over the phone.

The IRS actually has a dedicated, helpful website on avoiding tax scams, including several example scams. The site also explains how the IRS will contact you if you really do have a problem with return or account.

Responding to Scams

So, if you get such a call, just hang up; if you get such an email or text, delete it without clicking on any links. Don’t trust the listed identity of the sender – it’s sadly very easy to spoof an email sender or caller ID these days. If you’re worried that the message may be real, you can always just call the IRS directly. If you want to check on your refund, you can go to the official site here.

Furthermore, if you get an email that appears to be an IRS scam, you can forward it to phishing@irs.gov. (If it’s a text message, you can take a screenshot and send it to that same email address.) Alerting the IRS will help them to track down these criminals and hopefully prevent them from harassing other people.

Preventing Tax Return Fraud

If you work in the USA, you have an account with the IRS, even if you’ve never used it. You should plant your flag by claiming your account, before a scammer tries to do it on your behalf. If someone else manages to claim your account, they could potentially file a fraudulent tax return on your behalf claiming a large refund, leaving you to face the consequences.

The IRS also offers a pseudo-2FA (two-factor authentication) mechanism, too. Anyone who can file a tax return can request an IRS IP PIN. Once issued, you must use this 6-digit code to file your tax return – not just this year, but every year going forward. This is a good thing. If you have someone file your taxes for you, they will need your IP PIN to do it. You can get all the details on this site and apply here. You don’t have to request a new PIN – once you sign up for this, a new one will be generated and sent to you each year.

It’s also recommended that you file your tax return as early as possible. This just reduces the amount of time that the bad guys have to get up to mischief.

Sharing Tax Data Securely

Most reputable tax preparers today have secure online portals (websites) for collecting your tax forms, financial statements and other sensitive personal data. These portals may be run by third party companies, but in the US there are decent regulations around the security of financial data. So, I wouldn’t worry too much about uploading files and filling out personal financial information using the tax preparer web portal.

If your tax preparer is behind the times and just asks you to email your forms and info to them, do NOT send them without encrypting them first. Please read this article on how to send files securely. This is a handy skill to have for other situations, too. It can be a bit of a pain to do this, but email is not secure. Think of it as more like a postcard than a sealed envelope. (Even if both you and your tax preparer use a truly secure email service like Proton Mail, you should still encrypt the files before you send them.)