Scammers are always on the lookout for ways to get their hands on your money, and tax season offers the perfect opportunity for them to hatch various fraud schemes. This is the time when millions of Americans are sharing personal and financial details, making it an opportune moment for these con artists to not only swipe your tax refund but also your identity, experts warn.
Jennifer Hessing, a fraud analytics director at Wells Fargo, points out, "Anyone can become a target." She knows this firsthand after someone filed a tax return under her name using stolen information. Fortunately, the IRS flagged the fraudulent submission, and now Hessing uses an identity protection PIN for added security.
Why You Should Consider an Identity Protection PIN
Hessing’s approach is wise to follow. An IP PIN, which is a unique six-digit number, serves as a safeguard by confirming your identity when filing tax returns, thereby blocking others from attempting to do so with your information. Victims of tax-related identity theft receive a new PIN each year from the IRS once their issues are resolved.
Even if you haven’t faced identity theft, you can request an IP PIN proactively through the IRS. Your spouse and dependents can also get one after going through a verification process. As Hessing advises, "Don’t wait until you’re victimized to get this."
More from Your Money
As scams against taxpayers become increasingly sophisticated, losses from tax and financial crimes in 2024 amounted to $9.1 billion, according to the IRS. Steve Grobman, chief technology officer at cybersecurity firm McAfee, notes that this issue is no longer marginal. A McAfee survey reveals almost one in four Americans—23%—has fallen victim to a tax scam at some point.
Beware of Unsolicited Tax-Related Emails and Texts
One simple step to dodge scams is to ignore seemingly urgent text or email messages that claim to be from a governmental body or a tax preparation service, experts suggest. Scammers play on urgency and fear, aiming to trick you into giving up sensitive information or unknowingly downloading malicious software.
The IRS doesn’t reach out via text or email about tax payments or refunds. If you get an unexpected message about a tax issue, don’t react hastily. Avoid clicking any links; instead, verify the communication directly through the IRS website or consult your tax professional. Hessing explains, "The IRS won’t be calling you, demanding immediate payment or making threats of deportation or jail."
Crypto Payments for Taxes? Think Again
Scammers are also tailoring schemes around cryptocurrency demographics. McAfee notes that men are particularly targeted by crypto tax scams. "Scammers are peddling false narratives like paying taxes with crypto offers deadline extensions or discounts," Grobman asserts. (Neither claim holds water, and the IRS doesn’t accept crypto for federal tax payments, though some states might.)
Digital currency transactions lack the protective layers of credit card or banking options. For tax purposes, the IRS treats crypto as property, not a payment method. Grobman warns, "Once you pay with cryptocurrency, the money is usually gone for good."
Boost Your ‘Cyber Hygiene’
To safeguard your personal information, experts recommend using strong, unique passwords across all accounts and enabling two-factor authentication wherever feasible. Never recycle passwords or share them.
Check with your financial institutions to explore available security options. Grobman suggests, "Inquiring about locking down your digital life is essential for those who’ve been unfortunate enough to experience a scam."
Action Steps If You’ve Been Scammed
If you suspect you’ve fallen prey to a scam, had your information stolen, or believe someone is committing tax fraud, it’s vital to report it to the authorities. The IRS advises informing the Federal Trade Commission at IdentityTheft.gov if your Social Security number or individual tax ID has been compromised.
Should you discover that someone filed a tax return in your name, obtain a copy of the return and submit an Identity Theft Affidavit to the IRS, either online or by mail. If your tax preparer was responsible for a fraudulent filing, send a Return Preparer Complaint form to notify the IRS.
Additionally, resources concerning scams targeting veterans, service members, and their families are available through VSAFE.
For more guidance, you can enroll in Money 101, an eight-week course on financial freedom delivered weekly via email. Sign up here, also available in Spanish.
