Tax Scams Are Everywhere Are You Protected?
Imagine this: You’re waiting on your tax refund, but instead of seeing that much-needed deposit, you get a letter from the IRS saying you’ve already filed. Except, you haven’t. Welcome to the world of tax scams, where fraudsters are working overtime to steal identities and commit IRS fraud.
Tax season is a prime time for cybercriminals to strike, and falling victim to a scam can lead to stolen personal data, financial loss, and hours of stress trying to reclaim your identity. But don’t worry, you can protect yourself from tax fraud with the right knowledge and safeguards, including identity theft protection and identity theft insurance.
Let’s break down the biggest tax scams, how to prevent stolen tax refunds, and why the best identity theft insurance for tax fraud protection can help safeguard your financial future.
Common Tax Scams to Watch For
Scammers get more sophisticated every year, and knowing what to watch for is half the battle. Here are some of the most common tax season scams and red flags every taxpayer should know:
1. Phishing Tax Scams & Fake IRS Calls
Fraudsters often send emails or make calls pretending to be the IRS, demanding immediate payment or requesting sensitive information. Remember: The IRS will never call, text, or email you about unpaid taxes or refunds.
Red Flags:
- Emails with urgent language demanding action.
- Calls from someone claiming to be the IRS, especially if they threaten arrest.
- Links to fake IRS websites asking for your Social Security number.
2. How to Spot and Avoid Tax Preparer Fraud
Not all tax preparers are trustworthy. Some charge hidden fees, file false returns to get bigger refunds, or steal your information for personal gain.
Red Flags:
- Tax preparers who guarantee huge refunds without reviewing your documents.
- Offers to deposit your refund into their bank account first.
- Preparers who refuse to sign the return (this is illegal!).
3. Stolen Tax Refunds
One of the most frustrating scams is when thieves file a tax return in your name before you do, collecting your refund. How to prevent stolen tax refunds before filing? File early! The sooner you submit, the less time criminals have to steal your identity.
Red Flags:
- The IRS rejects your tax return because one was already filed.
- You receive IRS notices about wages from an employer you never worked for.
- You stop receiving tax documents or notices, which could mean your mail was stolen.
How to Avoid Tax Scams and Identity Theft
1. Verify IRS Communication
The IRS will only contact you via mail. If you get a call, text, or email claiming to be from them, it’s a scam. Never provide personal information to someone who contacts you unexpectedly.
2. Strengthen Your Cybersecurity
- Use strong, unique passwords for tax-related accounts.
- Enable multi-factor authentication on financial websites.
- Install identity theft protection software to detect fraud attempts.
3. Monitor Your Credit & Tax Filings
Check your credit reports regularly for suspicious activity, and sign up for the IRS Identity Protection PIN to prevent unauthorized tax filings.
4. Choose a Reputable Tax Preparer
- Check for credentials (CPAs, enrolled agents, or licensed tax preparers).
- Read reviews and ask for recommendations.
- Never sign a blank return!
Why You Need Identity Theft Protection & Insurance
Even with the best precautions, tax scams can still happen. If your identity is stolen, identity theft insurance can help cover the costs of restoring your identity, paying legal fees, and monitoring for future fraud.
The Best Identity Theft Insurance for Tax Fraud Protection Covers:
- Legal fees related to restoring your identity.
- Lost wages if you need to take time off to fix fraud issues.
- Credit monitoring and fraud alerts to prevent further damage.
- Dedicated fraud specialists to guide you through recovery.
Signs of IRS Tax Scams and How to Report Them
If you suspect a scam, don’t wait, take action immediately. Here’s how:
- Report the scam to the IRS via the Identity Theft Affidavit (Form 14039).
- Contact the Federal Trade Commission (FTC) to file a complaint.
- Place a fraud alert on your credit report with Equifax, Experian, or TransUnion.
- Freeze your credit to prevent scammers from opening accounts in your name.
- Check your Social Security earnings report for fraudulent activity.
Final Steps to Prevent Tax Scams This Season
Tax scams aren’t going away, but with awareness, early action, and identity theft protection, you can reduce your risk. Filing early, using secure methods, and investing in identity theft insurance can save you time, stress, and money.
At YourPolicy, we help individuals stay protected with the best identity theft insurance for tax fraud protection. Want to learn more? Contact us today!
Frequently Asked Questions (FAQs) About Tax Scams & Identity Theft
What are the most common tax scams to watch for?
The most common tax scams include phishing emails, fake IRS phone calls, stolen tax refunds, and fraudulent tax preparers. Criminals use these tactics to steal your Social Security number, bank details, or refund. Always verify IRS communications and file early to prevent fraud.
How can I tell if an IRS call or email is a scam?
The IRS never calls, texts, or emails demanding payment. If someone contacts you claiming to be the IRS and threatens legal action or asks for payment via gift cards or wire transfers, it’s a scam. Report it to the IRS and FTC immediately.
How do I prevent stolen tax refunds before filing?
To prevent stolen tax refunds, file your taxes early, sign up for the IRS Identity Protection PIN (IP PIN), and use identity theft protection services. Scammers file fake returns in your name. Beating them to it reduces risk.
What is the best identity theft insurance for tax fraud protection?
The best identity theft insurance for tax fraud protection covers legal fees, lost wages, credit monitoring, and expert fraud resolution. Look for policies that specifically mention tax-related identity theft recovery.
What are the red flags of tax preparer fraud?
Warning signs include guaranteed large refunds, charging fees based on refund size, refusing to sign returns, or offering to deposit your refund into their account first. Choose a licensed tax preparer with verified credentials.
How do I report tax scams and identity theft?
If you suspect tax fraud, report it using the IRS Identity Theft Affidavit (Form 14039). You can also contact the FTC, your state tax agency, and credit bureaus to flag potential fraud.
Can tax scams affect my credit score?
Yes, stolen tax refunds and identity theft can lead to fraudulent credit accounts in your name. Scammers can open loans, ruin your credit, and cause long-term financial damage. Monitoring your credit report is crucial.
What tax scam red flags should every taxpayer know?
Be cautious if you receive an IRS notice about an unknown tax return, get calls demanding payment, or notice missing tax documents. These are major tax scam red flags and should be reported immediately.
