1. TurboTax /
  2. Tax Calculators & Tips /
  3. Tax Tips Guides & Videos /
  4. Security /
  5. Tax Time Scams You Should Avoid

Tax Time Scams You Should Avoid

Updated for Tax Year 2017


OVERVIEW

Whether it's phishing, identity theft or hidden fees, tax season can bring out the scammers in full force. Learn how to protect yourself from the most common tax scams.


Let’s face it: most people dislike tax season. It can be stressful, confusing and financially painful.

There are some people, though, who enjoy it: scam artists. For these unscrupulous characters, tax season brings with it limitless opportunities to prey on the innocent and rob them of their hard-earned money.

Scam artists are experienced in a variety of schemes that earn them millions of dollars every year. They take advantage of the trusting nature of people who are too baffled by the tax code to realize when they are being swindled.

If you know what to look for—simple signs that betray the scam artist’s deception—you can survive tax season unscathed.


If it feels too good to be true, it is. Nobody can get you a bigger refund than you’re entitled to.

—Kelly Phillips Erb, Philadelphia-based tax attorney and founder of taxgirl.com


Scammers play on fears, vulnerabilities

Phishing and identity theft are the most common tax scams, said Kenneth Price, a financial planner with Austin Asset Management Co. (austinasset.com) in Austin, Texas.

Phishing can take many forms, but typically it’s done through phony emails. Scam artists adopt false identities as a way to extract personal information from their targets or to plant destructive software into a person’s computer.

They often pretend to be IRS agents, informing their targets of problems with their returns or refunds and telling them that the only solution is to send their Social Security numbers or bank account information. Or the email will include a link that, when opened, installs into the victim’s computer spyware or malware that can then mine all their files and personal data.

Unfortunately, this scam is often successful because people are taught to be scared of the IRS, said Kelly Phillips Erb, a Philadelphia-based tax attorney and founder of the blog taxgirl.com.

“Any time someone gets something that looks official, and it’s from the IRS, they jump on it,” Erb said. “If you get something from the IRS that says your payment was rejected—which was a scam making the rounds a few months ago—you'll be quick to send any information asked for because you don’t want to get in trouble. That’s the gut reaction.”

This scam is easy to spot, however, because the IRS never contacts people via email, Erb said.

Scammers will sometimes send emails that appear to come from legitimate tax preparers. If you receive a suspicious email that appears to come from TurboTax, forward it to us at spoof@intuit.com so we can investigate. You can also get the latest on any phishing scams we know about from our Online Security Center.

Erb notes that scam artists also play on people’s distrust of the government. They send messages, she said, claiming that the IRS is withholding money and that only by sending the scam artist their personal information can these hard-working, government-phobic taxpayers take back what is rightfully theirs.

Once they have a Social Security number in hand, the scammers can file a phony tax return in the victim's name, claiming a large refund and having it sent to a false address.

The IRS also counsels people to be on guard against groups that encourage them to make “frivolous and outrageous” claims based on the false premise that they are not lawfully obligated to pay taxes.

“While taxpayers have the right to contest their tax liabilities in court, no one has the right to disobey the law or IRS guidance,” the IRS notes in "IRS Summarizes "Dirty Dozen" List of Tax Scams for 2017."

One of the surest signs of a scam is when tax preparers make unrealistic promises, guaranteeing huge payouts, regardless of an individual’s financial situation.

“If it feels too good to be true, it is,” Erb said. “Nobody can get you a bigger refund than you’re entitled to.”

If people take part—even unwittingly—in schemes where they claim deductions or credits to which they are not entitled, or if they allow others to use their information to file false returns, they could be liable for financial penalties or even face criminal prosecution.

More red flags to watch for

Another red flag is a tax preparation fee based on a percentage of the return instead of a flat fee. “The IRS doesn’t prohibit it, though I think they should,” Erb said. “Statistically, those tend to be fraudulent returns, because there is a financial incentive for the preparer to induce you to claim funds you’re not entitled to.”

Taxpayers also need to be wary of ghost preparers, unlicensed companies or websites whose only goal is to take advantage of their so-called clients, said Kerry Freeman, owner of Freeman Income Tax Service in Anthem, Arizona.

Freeman insists that people should use only a tax service that is well-known, established or registered with the IRS.

“I know one person who had a $10,000 refund and paid $2,000 in fees to a fake tax preparer, who then disappeared with all the money,” Freeman said.

Some tax-related scams don’t have anything to do with theft, but everything to do with politics, Erb said.

Several years ago during a contentious election cycle in the South, people found fliers in their mailboxes informing them that their tax records were linked to the voting rolls, Erb said. If they failed to file a tax return in the past or owed the government money, the flier warned, they should not register to vote, because that was the only way the government would be able to track them down.

It was an attempt to suppress voter registration, and proof that fear of the IRS is a con artist’s best friend, Erb said.

“This time of year feeds on people’s general insecurities and fears and mistrust of the government,” she said.

If you suspect that you are the victim of a scam, contact the IRS Identity Protection Specialized Unit at 1-800-908-4490. Suspicious emails should be forwarded to the IRS at phishing@irs.gov.

Beware the refund anticipation loan

One of the most valuable characteristics taxpayers can possess is patience, said Rick Brooks, a financial planner with Blankenship & Foster LLC, in Solana Beach, California.

When it comes to collecting their refunds, people are often given the option to either wait several weeks for the Internal Revenue Service to mail a check or to pay a tax preparer or financial institution a fee to receive it right away.

This is called a refund anticipation loan, a short-term loan backed by an expected tax refund. It is perfectly legal, but it can be construed as a scam nonetheless, Brooks said.

For example, a taxpayer may be given a debit card to withdraw the cash from their tax refund. Each ATM withdrawal, however, has a ceiling and carries a fee of up to $2.50 paid to the lender and an additional fee of up to $2.50 paid to the ATM operator. By the time she retrieves all of her refund using multiple withdrawals, these fees may absorb more than 10 percent of the original amount.

“It’s really an expensive way to get an advance on your money,” Brooks said. “If you can wait three weeks, the IRS can deposit it into your bank account for free. Is three weeks worth losing more than 50 bucks?”

Get every deduction you deserve

TurboTax Deluxe searches more than 350 tax deductions and credits so you get your maximum refund, guaranteed.

For only $59.99*
Start for Free

Looking for more information?

* Important Offer Details and Disclosures
  • TURBOTAX ONLINE/MOBILE

  • Try for Free/Pay When You File: TurboTax online and mobile pricing is based on your tax situation and varies by product. Absolute Zero $0 federal (forms 1040EZ/1040A) + $0 state limited time offer only available with TurboTax Free Edition; offer may change or end at any time without notice. Actual prices are determined at the time of print or e-file and are subject to change without notice. Savings and price comparisons based on anticipated price increase. Special discount offers may not be valid for mobile in-app purchases.
  • QuickBooks Self-Employed Offer with TurboTax Self-Employed and TurboTax Live for Extension Filers: To receive your complimentary subscription to QuickBooks Self-Employed through 10/31/19, you must pay for your 2017 TurboTax Self-Employed or TurboTax Live return between 4/18/18 and 10/15/18 and sign-in and access your QuickBooks Self-Employed account via mobile app or at https://selfemployed.intuit.com/turbotax at least twice by 12/31/18. You will have the option of renewing your QuickBooks Self-Employed subscription by 10/31/19 for another year at the then-current subscription rate. You may cancel your subscription at any time from within the QuickBooks Self-Employed billing section. See QuickBooks.com for price comparison. Offer not valid for existing QuickBooks Self-Employed subscribers already on a paid subscription.
  • Pays for itself (TurboTax Self-Employed): Estimates based on deductible business expenses calculated at the self-employment tax income rate (15.3%) for tax year 2017. Actual results will vary based on your tax situation.
  • Anytime, anywhere: Internet access required; standard data rates apply to download and use mobile app.
  • Fastest refund possible: Fastest tax refund with e-file and direct deposit; tax refund time frames will vary.
  • Pay for TurboTax out of your federal refund: A $X.XX Refund Processing Service fee applies to this payment method. Prices are subject to change without notice.
  • TurboTax Help and Support: Access to a TurboTax specialist is included with TurboTax Deluxe, Premier, Self-Employed and TurboTax Live; not included with Free Edition (but is available as an upgrade). TurboTax specialists are available to provide general customer help and support using the TurboTax product. SmartLook on-screen help is available on a PC, laptop or the TurboTax mobile app. Service, area of expertise, experience levels, wait times, hours of operation and availability vary, and are subject to restriction and change without notice.
  • Tax Advice, Expert Review and TurboTax Live: Access to tax advice and Expert Review (the ability to have a Tax Expert review and/or sign your tax return) is included with TurboTax Live or as an upgrade from another version, and available through October 15, 2018. These services are provided only by credentialed CPAs, EAs or tax attorneys. State tax advice is free. Some tax topics or situations may not be included as part of this service, which shall be determined in the tax expert’s sole discretion. In the event your return is reviewed by a tax expert and requires a significant level of tax advice or actual preparation, the tax expert may be required to sign your return as the preparer at which point they will assume primary responsibility for the preparation of your return. Expert Review [and TurboTax Live] not available on the TurboTax mobile app or when using a web browser on your mobile phone. On-screen help is available on a PC, laptop or the TurboTax mobile app. Service, area of expertise, experience levels, wait times, hours of operation and availability vary, and are subject to restriction and change without notice.
  • Tax Return Access and My Docs features: Included with TurboTax Deluxe, Premier, Self-Employed, TurboTax Live or with PLUS benefits. Access to all tax-related documents we have on file for you is available through 10/31/2019. Terms and conditions may vary and are subject to change without notice.
  • #1 best-selling tax software: Based on aggregated sales data for all tax year 2016 TurboTax products.
  • Most Popular: TurboTax Deluxe is our most popular product among TurboTax Online users with more complex tax situations.
  • CompleteCheck: Covered under the TurboTax accurate calculations and maximum refund guarantees.
  • #1 rated online tax prep provider: Based on independent comparison of the best online tax software by TopTenReviews.com March 13, 2017.
  • Get tips based on your tax and credit data to help get you to where you want to be: Tax and credit data accessed upon your consent.
  • TURBOTAX CD/DOWNLOAD SOFTWARE

  • TurboTax CD/Download products: Price includes tax preparation and printing of federal tax returns and free federal e-file of up to 5 federal tax returns. Additional fees apply for e-filing state returns. E-file fees do not apply to New York state returns. Savings and price comparison based on anticipated price increase. Prices subject to change without notice.
  • Fastest refund possible: Fastest tax refund with e-file and direct deposit; tax refund time frames will vary.
  • Pay for TurboTax out of your federal refund: A $X.XX Refund Processing Service fee applies to this payment method. Prices are subject to change without notice. This benefit is available with TurboTax Federal products except TurboTax Business.
  • About our TurboTax Product Experts: Customer service and product support vary by time of year.
  • About our credentialed tax experts: Live tax advice via phone is included with Premier and Home & Business; fees apply for Basic and Deluxe customers. State tax advice is free. Service, experience levels, hours of operation and availability vary, and are subject to restriction and change without notice. Not available for TurboTax Business customers.
  • #1 best-selling tax software: Based on aggregated sales data for all tax year 2016 TurboTax products.
  • Data Import: Imports financial data from participating companies; may require a free Intuit online account. Quicken and QuickBooks import not available with TurboTax installed on a Mac. Imports from Quicken (2016 and higher) and QuickBooks Desktop (2012 and higher); both Windows only. Quicken import not available for TurboTax Business. Quicken products provided by Quicken Inc., Quicken import subject to change.