The Top 10 Tax Scams of 2024

1. Phishing Scams: Cybercriminals send fake emails or create fake websites pretending to be from the IRS or tax preparation companies. They often request personal information, such as Social Security numbers or financial details, which they then use for identity theft or fraudulent tax filings.

2. Identity Theft: This scam involves stealing someone's personal information, such as their Social Security number, to file a tax return and claim a fraudulent refund. Scammers may also use stolen identities to apply for jobs, credit cards, or other benefits.

3. Fake Charities: Scammers set up fake charities or impersonate legitimate organizations to solicit donations from unsuspecting taxpayers. They often use emotional appeals or fake testimonials to trick people into giving money, which they then pocket for themselves.

4. Tax Preparer Fraud: Some tax preparers may engage in fraudulent activities, such as claiming false deductions or credits on their clients' tax returns to inflate refunds. Taxpayers should be cautious when choosing a tax preparer and ensure they are reputable and trustworthy.

5. Social Security Number Scams: Scammers may call taxpayers claiming to be from the IRS or Social Security Administration and threaten legal action if they do not provide their Social Security number or other personal information. The IRS and SSA will never call taxpayers to demand immediate payment or personal information over the phone.

6. Fake IRS Letters: Scammers send fake letters or notices purportedly from the IRS demanding immediate payment or threatening legal action if the recipient does not comply. These letters often contain grammatical errors or inconsistencies that can help identify them as fraudulent.

7. Tax-Related Identity Theft: This scam involves using stolen personal information to file a tax return and claim a refund before the legitimate taxpayer has a chance to do so. Victims may not realize they are victims until they try to file their own tax return and discover that one has already been filed using their information.

8. Inflated Refund Claims: Some tax preparers may promise taxpayers inflated refunds in exchange for a fee or a percentage of the refund. They may use tactics such as claiming false deductions or credits to artificially inflate the refund amount.

9. Falsifying Income: Taxpayers may attempt to lower their tax liability by underreporting or omitting income from their tax returns. This is illegal and can result in fines, penalties, or criminal prosecution if discovered by the IRS.

10. Abusive Tax Shelters: Some taxpayers may be lured into investing in abusive tax shelters that promise to reduce or eliminate their tax liability. These schemes often involve complex financial transactions or legal structures that are designed to exploit loopholes in the tax code. However, the IRS actively investigates and penalizes taxpayers who participate in abusive tax shelters.

It's important for taxpayers to remain vigilant and be aware of these scams to avoid becoming victims. They should never provide personal information or payment to anyone claiming to be from the IRS without verifying their identity and legitimacy. Additionally, taxpayers should report any suspected scams or fraudulent activity to the IRS or appropriate authorities.

Here are the top 10 tips to prevent tax-related scams:

1. Be Wary of Suspicious Emails and Phone Calls: The IRS does not initiate contact with taxpayers via email, text messages, or social media channels to request personal or financial information. Be cautious of unsolicited communications claiming to be from the IRS or tax authorities, especially if they ask for sensitive information or demand immediate action.

2. Verify the Identity of Tax Preparers: Before hiring a tax preparer, research their credentials and reputation. Look for certified public accountants (CPAs), enrolled agents, or other professionals with a valid Preparer Tax Identification Number (PTIN). Avoid tax preparers who promise unusually high refunds or charge fees based on a percentage of your refund.

3. Protect Personal Information: Safeguard your Social Security number, financial account numbers, and other sensitive information. Only provide this information to trusted entities when necessary, such as legitimate tax preparers or government agencies. Be cautious when sharing personal information online and use secure methods for transmitting sensitive data.

4. File Early: Filing your tax return early can help prevent tax-related identity theft. By submitting your return before potential scammers, you reduce the risk of someone fraudulently filing a return using your information. Monitor your mailbox for any tax-related documents and file promptly to minimize the window of opportunity for identity thieves.

5. Use Secure Websites for Online Filing: When e-filing your tax return or making electronic payments, ensure you are using a secure and reputable website. Look for "https" in the website URL and a padlock icon in the browser address bar, indicating that the site is encrypted and secure. Avoid using public Wi-Fi networks or unsecured computers for sensitive transactions.

6. Review Your Credit Report Regularly: Monitor your credit report regularly for any suspicious activity or unauthorized accounts. Identity thieves may use stolen personal information to open credit accounts or loans in your name. By reviewing your credit report periodically, you can detect and address any fraudulent activity before it escalates.

7. Be Skeptical of Promises of Large Refunds: Be cautious of tax preparers or schemes that promise unusually large refunds or guaranteed refunds without reviewing your financial information. While legitimate deductions and credits can reduce your tax liability, exaggerated claims or fraudulent tactics may attract unwanted attention from the IRS and lead to penalties or legal consequences.

8. Educate Yourself About Common Scams: Stay informed about common tax-related scams and tactics used by fraudsters. The IRS regularly updates its list of tax scams and issues alerts to warn taxpayers about emerging threats. By familiarizing yourself with these scams, you can recognize warning signs and take proactive steps to protect yourself against fraud.

9. Secure Your Devices and Personal Information: Keep your computer, smartphone, and other devices secure by using up-to-date antivirus software, firewalls, and encryption tools. Enable multi-factor authentication for online accounts and use strong, unique passwords for each account. Avoid clicking on suspicious links or downloading attachments from unknown sources, as they may contain malware or phishing attempts.

10. Report Suspicious Activity: If you encounter a potential tax-related scam or identity theft, report it to the appropriate authorities immediately. Contact the IRS Identity Protection Specialized Unit at 1-800-908-4490 or visit the IRS website for guidance on reporting identity theft and fraudulent activity. Additionally, notify your financial institutions and credit bureaus to protect your accounts and credit information.

By following these tips and remaining vigilant against tax-related scams, you can minimize the risk of falling victim to fraudsters and protect your personal and financial information during tax season and throughout the year. Remember to stay informed, verify the legitimacy of tax-related communications, and take proactive measures to safeguard your identity and assets.