looking at taxesCompleting your tax return every year is a hard enough task without worrying about tax scams.

Unfortunately, there are a lot of scam artists out there who have ripped off countless Americans. Here are two common fraudulent tax schemes to be aware of: 

1. Impersonation of Internal Revenue Service agents. 

You may have heard stories about taxpayers getting automated telephone calls or emails from thieves claiming to be IRS agents. The communication typically starts with a warning that they owe taxes that need to be paid right away in order to avoid a severe penalty or criminal prosecution.

The con artists try to scare victims into sending cash, usually through prepaid debit cards or by wire transfer.  

These crooks can alter the phone’s caller ID to make it look like the IRS or another government agency is the caller. The emails often contain a fake IRS document. The impostor may also use an individual’s name, address, and other personal information to sound more convincing.

The Treasury Inspector General for Tax Administration (TIGTA) has received reports of approximately 736,000 scam communications since October 2013. Roughly 4,550 victims have lost more than $23 million because of this scam. 

What the IRS Will Never Do

Keep in mind that the IRS will never do any of the following:

  • Contact you to demand immediate payment. The IRS will not call you without first sending you a bill by mail.

  • Demand that you pay taxes and not allow you to question or appeal the amount you owe.

  • Require that you pay your taxes in a certain way such as with a prepaid debit card.

  • Ask for your credit or debit card account number over the phone.

  • Threaten to call the police or other agencies to arrest you for not paying. 

What You Can Do

If you are contacted by someone pretending to be from the IRS, here is what you should do:

Hang up the phone.

Contact the TIGTA to report the call or use the IRS Impersonation Scam Reporting web page. You can also call (800) 366-4484.

Report the call to the Federal Trade Commission using the FTC Complaint Assistant.

If you think you owe taxes or are not sure, you can call the IRS at (800) 829-1040.

2. Identity Theft/Fake Tax Returns 

It’s too late for this year, but the IRS highly recommends that taxpayers file their annual returns as early as possible. Why? To prevent cyber thieves from filing a fake return using your Social Security number to obtain a refund.

If someone uses your identity to file a tax return, you usually won’t find out about it until you file your return. The latter return will be rejected because the IRS will only accept one return for a given Social Security number.

If this happens to you, you’ll need to complete IRS Form 14039 to notify the IRS of the fraudulent activity.  Mail the form to the IRS, along with a copy of your Social Security card and your driver’s license (use a mail service, such as FedEx, where you can track delivery). If you don’t have a driver’s license you can send a copy of your passport, military ID or another government-issued ID card.

Naturally, if someone has enough information about you to file a fake tax return they can create other fraudulent financial transactions. You should, therefore, place a freeze on your credit report file with the three major credit bureaus – Experian, TransUnion and Equifax.