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 email@example.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 "Don't Fall Prey to the 2011 Dirty Dozen Tax Scams."
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.