Outsmarting tax scams: Your guide to keeping your finances safe

January 17, 2024

Tax season brings scammers out of the woodwork. Learn how to identify their tricks and protect yourself from being a victim.

As if filing your taxes isn’t stressful enough, there’s something else you need to worry about during tax season: tax-related scams. Fraud can happen any time, of course, but the months leading up to the April filing deadline are particularly treacherous.

In order to protect yourself, it’s important to learn how to spot common schemes. Here’s how several of them work — plus steps you can take to stay safe and what to do if you become a victim.

The most common tax scams

Threats from scammers are always evolving, but these three are currently in circulation:

1. Tax identity theft

What it is: There are two types of tax identity theft to be on the lookout for. The first is when someone files a tax return in your name to collect your refund. You may only find out about this when you submit your legitimate tax return and the IRS rejects it because someone else has already filed using your Social Security number.

The second occurs when a person gets a job and uses your Social Security number for reporting their wages. In this case, you may receive a notice from the IRS indicating that you earned income from an employer you never actually worked for — and now owe taxes on those phantom wages. Also, if you receive any type of federal benefits, including unemployment or Social Security, you could receive a notice that your benefits are being reduced or stopped entirely because of your supposed higher income.

How to protect yourself: To prevent a fraudulent return from being filed in your name, you can request an Identity Protection PIN from the IRS. You’ll receive a new security code in the mail each year and submit the PIN with your tax return. Scammers without access to this code won't be able to file a return.

Filing your return as early as possible each tax season can help guard against fraud — essentially, you want to try to beat the scammers to it. In addition, read all mail from the IRS or other federal agencies so you can catch any suspicious activity.

2. IRS imposter scam

What it is: Scammers impersonate the IRS to collect sensitive personal data, like your Social Security number, date of birth and bank account information. In one variation of this scam, you may receive a call, text, email or social media message stating you have an unclaimed refund. Another version mentions unclaimed property, which doesn’t even fall under IRS jurisdiction.

When you’re online, you may be prompted to click on a link and enter personal information to claim your refund. Scammers might also ask you to send pictures of recent bank statements. Tens of thousands of Americans have lost a total of $28 million to IRS impostor scams since 2018, according to the Federal Trade Commission (FTC).

Some scammers even call demanding a payment to the IRS and threatening police action if you don’t comply. “There is a sense of urgency or persistent follow-ups that demand an immediate response or payment,” says Jodi Daniels, faculty member at IANS Research and founder and CEO of Red Clover Advisors, a data privacy company. “The goal is to create fear.”

How to protect yourself: Even if you feel pressured into answering phone calls or clicking on email links, avoid doing so. The IRS never communicates with taxpayers via email, text or social media. “Real IRS issues come in the mail on formal letterhead and require logging into the IRS or state tax revenue centers,” Daniels says. Another red flag is spelling or punctuation errors in correspondence.

3. Ghost preparer

What it is: With this scam, you hire a tax preparer to do your taxes, only to be “ghosted” by them before the work is completed. These so-called ghost preparers collect large upfront fees for preparing your taxes but never sign or file your return.

How to protect yourself: “A real tax preparer will have a business license and be registered with the secretary of state,” Daniels says. “They do not demand urgent information or full payment upfront.” All paid tax preparers need an IRS Preparer Tax Identification Number, so make sure you ask to see it.

The IRS has a searchable database of preparers, but not all credentialed ones are on it. Some states, such as New York and California, also provide a searchable database of professionals authorized to prepare returns in those states.

To find a reputable tax preparer, ask friends for recommendations and check for complaints with your local Better Business Bureau. Just be wary of promises of unusually high refunds, never sign a blank return and review your return before the preparer files it. Daniels also recommends double-checking the bank account number for direct deposit of your refund — make sure it’s your personal account, not a preparer's account.

What to do if you’re a victim of tax fraud

If you end up being scammed, don’t be too hard on yourself. Clever scammers are finding innovative ways to trick people. So give yourself a break — then take immediate action.

If a fraudulent tax return is filed in your name: You must respond within 10 calendar days of having your tax return rejected. Submit either an identity theft affidavit (Form 14039) or a police report stating that you’ve been a victim of identity theft. You can submit your form online or send a copy via mail or fax. Instructions are on the bottom of the form. 

If someone reports wages under your name: In this case, you may receive a letter from the IRS stating that you didn’t report wages. Along with following any specific instructions in the letter, submit an identity theft affidavit.

If your identity is stolen: In addition to contacting the IRS, you can report any identify theft to the FTC. To further protect your finances, you can ask the three major credit bureaus — Experian, TransUnion and Equifax — to add a fraud alert on your account or even put a credit freeze in place, which prevents anyone from opening a new credit account in your name. Daniels also recommends alerting the financial institution where you have your tax refund deposited so it can keep an eye out for suspicious activities.

If a preparer ghosts you: If you suspect you’ve been the victim of a ghost preparer, report the person to your local police department. Then file a Form 14157-A, Tax Return Preparer Fraud or Misconduct Affidavit with the IRS and send relevant backup materials.

Tax scammers may be getting more sophisticated, but using these best practices can keep you safe from becoming a victim.

Visit our tax resource center for more tips and information to help you navigate tax season and beyond.

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Handling the finances of someone who has died: Terms and definitions

Resources for managing financial matters after an unexpected death

What you need to know as the executor of an estate

When your spouse has passed away: A three-month financial checklist

What documents do you need after a loved one dies?

Simple steps to be ready for a natural disaster

Checklist: financial recovery after a natural disaster

How does money influence your planning?

College budgeting: When to save and splurge

U.S. Bank Student Scholarship

Student checklist: Preparing for college

Uncover the cost of a college diploma

How to save money in college: easy ways to spend less

How to gain financial independence from your parents

The A to Z’s of college loan terms

Co-signing 101: Applying for a loan with co-borrower

Practical money skills and financial tips for college students

How to build credit as a student

5 things to know before accepting a first job offer

Learn to spot and protect yourself from common student scams

How I did it: Paid off student loans

Bank Notes: College cost comparison

Four ways to make a strong resume for your first real job

Tips to earn that A+ in back-to-school savings

7 ways to teach your children to be scam-savvy

How to prevent fraud

Outsmart tax scams and keep your finances safe

Lessons learned from experiencing a scam

Keep your finances safe and secure: Essential tips for preventing check fraud

How to avoid student loan scams

Protecting elderly parents’ finances: 6 steps to follow when managing their money

4 ways to outsmart your smart device

Banking basics: Avoiding fraud and scams

How to spot an online scam

Money muling 101: Recognizing and avoiding this increasingly common scam

What you need to know about identity theft

What is financial fraud?

5 tips for seniors to stay a step ahead of schemers

Recognize. React. Report. Don't fall victim to financial exploitation

Recognize. React. Report. Caregivers can help protect against financial exploitation

Webinar: U.S. Bank asks: Are you safe from fraud?

Is online banking safe?

How-to guide: What to do if your identity is stolen

How you can prevent identity theft

8 tips and tricks for creating and remembering your PIN

How to avoid being the victim of a digital payments scam

Helping Gen Z build financial confidence

Short- and Long-Term Financial Goals for Every Life Stage

How your taxes can change after a major life event

What to do with your tax refund or bonus

Financial goals for 2024 a 12-month planning guide

How to save for a dream vacation

Tips for talking about money when friends earn more

Building confidence in your finances and career

Pros and cons of a personal line credit

3 tips for saving money when moving to a new home

What is a Certificate of Deposit? And what to know before opening an account

What does FDIC mean?  

3 financial tools to help automate your finances

3 ways to keep costs down at the grocery store (and make meal planning fun)

5 tips for creating (and sticking to) a holiday budget

Financial checklist: Preparing for military deployment

How to financially prepare for a military PCS

Planning self-care moments that matter (and how to finance them)

5 things to consider when deciding to take an unplanned trip

Stay committed to your goals by creating positive habits

Growing your savings by going on a ‘money hunt’

Working with an accountability partner can help you reach your goals

The banking app you need as a new parent

Why a mobile banking app is a ‘must have’ for your next vacation

How to decide when to shop local and when to shop online

Your guide to starting a job: Resources to help along the way

How to set yourself up for success in your first job

5 myths about emergency funds

Financial Wellness Assessment

Does your savings plan match your lifestyle?

Mobile banking tips for smarter and safer online banking

Uncover the cost: Wedding

Uncover the cost: International trip

Are savings bonds still a thing?

Tips to overcome three common savings hurdles

Adulting 101: How to make a budget plan

Personal loans first-timer's guide: 7 questions to ask

Mindset Matters: How to practice mindful spending

How and when to ask for a raise

How to choose the right rewards credit card for you

How can I help my student manage money?

How to manage money in the military: A veteran weighs in

Things to know about the Servicemembers Civil Relief Act

You can take these 18 budgeting tips straight to the bank

3 tips for saving money easily

Save time and money with automatic bill pay

How to best handle unexpected expenses

Stay on budget — and on the go — with a mobile banking app

Do you and your fiancé have compatible financial goals?

U.S. Bank asks: Transitioning out of college life? What’s next?

U.S. Bank asks: Do you know your finances?

U.S. Bank asks: Do you know what an overdraft is?

Personal finance for teens can empower your child

How to save for a wedding

How can you pay bills online the right way?

How compound interest works

Dear Money Mentor: How do I set and track financial goals?

Lost job finance tips: What to do when you lose your job

Money Moments: 3 smart financial strategies when caring for aging parents

Money management guide to financial independence

First-timer’s guide to savings account alternatives

7 financial questions to consider when changing jobs

5 tips to use your credit card wisely and steer clear of debt

Money Moments: 3 tips for planning an extended leave of absence

Overdrafts happen: Steps to get you back on track

P2P payments make it easier to split the tab

Essential financial resources and protections for military families

How to stop living paycheck to paycheck post-pay increase

Practical money tips we've learned from our dads

6 ways to spring clean your finances and save money year-round

How to cut mindless spending: real tips from real people

How to increase your savings

Bank from home with these digital features

Military finance: How to create a family budget after military service

Discovering your money personality can help you save

Tips on how couples can learn to agree about money

Understanding your military GI Bill benefits

How grandparents can contribute to college funds instead of buying gifts

How to open and invest in a 529 plan

Using 529 plans for K-12 tuition

Is a home equity loan for college the right choice for your student

Parent checklist: Preparing for college

How to apply for federal student aid through the FAFSA

What to consider before taking out a student loan

Are you ready to restart your federal student loan payments?

Consolidating debts: Pros and cons to keep in mind

How to talk to your lender about debt

Everything you need to know about consolidating debts

Managing debt

Best travel credit card perks for family vacations

5 tips to use your credit card wisely and steer clear of debt

5 steps to selecting your first credit card

How to use debt to build wealth

What’s a subordination agreement, and why does it matter?

Understanding the true cost of borrowing: What is amortization, and why does it matter?

Know your debt-to-income ratio

How to pay off credit card debt

Your quick guide to loans and obtaining credit

Dear Money Mentor: How do I begin paying off credit card debt?

Checklist: 10 things to look for when touring a home

How to sell and buy a home at the same time

Dear Money Mentor: What is cash-out refinancing and is it right for you?

Home improvements with the best ROI

Overcoming high interest rates: Getting your homeownership goals back on track

How we did it: Converted to solar power

PCS moving checklist for military spouses and families

For today's homebuyers, time and money are everything

Crypto + Homebuying: Impacts on the real estate market

How I did it: Bought my dream home using equity

Buying a home Q&A: What made three homeowners fall in love with their new home

House Hacks: How buying an investment property worked as my first home

Starting your homebuying journey

Managing the impacts of appraisal gaps in a hot housing market

How I did it: Built living spaces to support my family

Spring cleaning checklist for your home: 5 budget-boosting tasks

Saving for a down payment: Where should I keep my money?

Your guide to breaking the rental cycle

Checklist: 6 to-dos for after a move

What are conforming loan limits and why are they increasing

Uncover the cost: Building a home

The lowdown on 6 myths about buying a home

4 ways to free up your budget (and your life) with a smaller home

Get more home for your money with these tips

Money Moments: Tips for selling your home

Money Moments: How to finance a home addition

How I did it: My house remodel

First-time homebuyer’s guide to getting a mortgage

Dear Money Mentor: When should I refinance a mortgage?

Beyond the mortgage: Other costs for homeowners

10 questions to ask when hiring a contractor

What is an escrow account? Do I have one?

These small home improvement projects offer big returns on investment

Should you get a home equity loan or a home equity line of credit?

Mortgage basics: What’s the difference between interest rate and annual percentage rate?

Is a home equity line of credit (HELOC) right for you?

How to use your home equity to finance home improvements

How does a home equity line of credit (HELOC) work?

How do I prequalify for a mortgage?

Home equity: Small ways to improve the value of your home

Can you take advantage of the dead equity in your home?

4 questions to ask before you buy an investment property

10 uses for a home equity loan

What applying for store credit card on impulse could mean

Improving your credit score: Truth and myths revealed

How to spot a credit repair scam

6 essential credit report terms to know

5 unique ways to take your credit card benefits further

How to maximize your credit card rewards

Test your loan savvy

Decoding credit: Understanding the 5 C’s

Should you give your child a college credit card?

U.S. Bank asks: What do you know about credit?

What types of credit scores qualify for a mortgage?

What is a good credit score?

Credit score help: Repairing a bad credit score

How to improve your credit score

Common questions about electric vehicles (EVs)

What to keep in mind when buying a used car from a private seller

How I decided that buying an RV was worth it for me

Take the stress out of buying your teen a car

Questions to ask before buying a car

How to choose the best car loan for you

Disclosures

U.S. Bank and its representatives do not provide tax or legal advice. Each individual's tax and financial situation is unique. Individuals should consult their tax and/or legal advisor for advice and information concerning their particular situation

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Loan approval is subject to credit approval and program guidelines. Not all loan programs are available in all states for all loan amounts. Interest rate and program terms are subject to change without notice. Mortgage, Home Equity and Credit products are offered through U.S. Bank National Association. Deposit products are offered through U.S. Bank National Association. Member FDIC.