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With tax filing season around the corner, a number of tax scams such as phishing and smishing attacks are likely to be on the rise. Euronews Business looks at which tax scams are the most common and how to protect yourself from them.
Tax season can be quite stressful, as most of us grapple with confusing tax form language, hunt down months-old receipts and hope for refunds. However, this is also a time for tax scammers to prey on harassed tax filers, with a variety of new scams. In 2024, the US Internal Revenue Service (IRS) revealed $9.1 billion (€8.7bn) in fraud from financial and tax crimes. Michael Moore, chief information officer at cloud-first cybersecurity provider Next Perimeter, said in a report: “During tax season, scammers know people are stressed, rushing to file, and more likely to fall for a well-timed trick. The best way to protect yourself? Slow down and stay skeptical. “The IRS isn’t going to call you demanding immediate payment, and they definitely won’t text you a link to ‘fix an error’ on your return. If someone is pressuring you to act fast, that’s your cue to step back and verify before doing anything. “File early if you can—that way, if someone tries to file in your name, they’ll hit a dead end. Use strong passwords for tax software, enable two-factor authentication, and use an IRS Identity Protection PIN for an extra layer of security. “If you’re working with a tax preparer, don’t just go with whoever promises the biggest refund. Check their credentials, ask questions, and make sure they sign your return—ghost preparers love to disappear when trouble arises.”So which are the most common tax scams to look out for and how can taxpayers better avoid them? Refund offers that are too good to be trueIn several cases, tax scammers may pretend to be genuine professionals promising you attractive refunds. However, they often ask for money upfront, usually a share of the return, before filing a fake tax return on payer’s behalf. This in turn, leaves taxpayers vulnerable to the authorities once the fraud is detected. These types of scams may come through an email with a catchy subject line and an official looking HMRC, IRS or similar tax authority logo, offering an unclaimed refund. These emails may ask taxpayers for their personal information as well as a fee, leading to increased chances of identity theft as well. The best way to avoid these scams is to not open suspicious looking emails, especially with subject lines that sound too good to be true, or click on any links within these emails. It’s also best to stick to experienced and trusted tax professionals for any refund claims. Ghost tax preparers and fake tax help‘Ghost’ or ‘phantom’ tax preparers are scammers who may pretend to file your returns, but don’t actually sign the return. They may also inflate your numbers to potentially get you a bigger refund, but usually disappear once their fees are paid. Needless to say, the tweaked numbers may land filers in hot water with their tax authorities. In some cases, they may also steal your refund, along with your identity. Ghost tax preparers may often reach out through emails or texts and offer to do your taxes. In other cases, especially when it comes to online filing, fake tax advisors or agents can pretend to offer help creating online tax accounts, but in reality, use these to steal sensitive details and often refunds as well. However, the best way to avoid this is to do thorough research on anyone you employ for your returns, and check their credentials before allowing them access to your personal information. In the US, tax preparers can register in the IRS directory, with an official Preparer Tax Identification Number (PTIN). Tax filers can also check online reviews for tax companies before employing one, as well as create their own online tax accounts to reduce the risk of fraud. Fake charity scamsAnother type of tax scam involves fake charities, which often pop up after some kind of natural disaster. Scammers can create these charities and then guilt or pressure taxpayers into donating to them, while claiming that this will give them a tax break as well. However, this money goes straight to them. One way to avoid this kind of scam is to check charities’ credentials and whether they are tax exempt using government websites such as the IRS Tax Exempt Organisation Search in the US and the National Council for Voluntary Organisations (NCVO) in the UK, before donating any amount. Taxpayers should also be wary of charities that ask for donations in gift cards or cash. Smishing and phishing scamsOne of the most popular tax scams currently are smishing and phishing scams, which involve fraudulent text messages or emails claiming to be from a legitimate tax authority. These emails or texts often ask taxpayers to verify their personal details and are usually intended to steal financial and identity information. For these kinds of scams, it’s best not to reply to the emails or texts, and not divulge any sensitive or private details, such as passwords and bank details. Taxpayers should also ensure not to click on any suspicious links or download attachments. Usually, such communication can also be reported to the relevant tax authorities. Owing the tax authorities scamA tax scam that has been surging in the last few years is one where taxpayers are made to believe that they owe tax authorities like the HMRC and the IRS back taxes. These scammers usually call victims and create a desperate sense of urgency, with taxpayers potentially being threatened with supposed deportation, arrest or asset seizure if the pending taxes are not paid immediately. One way to handle these kinds of scams is to find out beforehand about how your local tax authority is likely to contact you: whether by call, email, text or mail. As such, you may be able to determine whether your local authority is likely to call you.For example, the IRS usually sends letters about back payments first, instead of calling for payments. It may also be a good idea to hang up the phone and contact the authorities in question directly to verify. Social media tax scamsThe rise of social media in the past several years has also led to a boom in tax scams via social media platforms such as Facebook and TikTok. These are mostly in the form of tax ‘hacks’, which promise outsized refunds with very little effort. However, needless to say, these hacks may involve fraud or questionable tax credits. One way to avoid these scams is to always cross check any tax hack you come across with a verified tax professional. Scams targeting non-English speakers and seniorsSome tax scammers choose to target non-English speakers and senior citizens, using a mix of intimidation tactics and language barriers to coerce or trick them into divulging their personal details or giving up their money. One of the best ways to avoid these is by spreading awareness as much as possible and by helping non-English speaking and older relatives and friends identify this kind of scam. Debt relief and tax shelter scamsSeveral scammers lure victims with promises of settling tax debt considerably cheaply, however, charge large fees for this supposed service, often disappearing afterwards. In other cases, scammers will also say that they can help move your assets into ‘special’ trusts to get rid of your tax obligations. Needless to say, this can end up leading to significant legal challenges. One way to avoid debt relief scams is by using only those tax relief services that are approved by your local tax authority, which may come without upfront fees. However, if you’ve received an unsolicited offer of the same, there’s a higher chance that it may be a scam. To potentially avoid trust and tax shelter scams, it’s best to always talk to a legitimate tax advisor who can better guide you in choosing tax schemes. It may also be a good idea to steer clear of schemes offered by financial advisors you don’t know.
