BBB alert: Scammers strike hard as tax season opens

The 2024 tax season began Jan. 29, so the Better Business Bureau is alerting the public to the schemes that con artists will use over the next several weeks to take your money, personal identity information, and peace of mind.

According to the IRS, taxpayers lost $5.7 billion due to tax scams and fraud in 2022.

For the first time in five years, the tax filing deadline is the traditional April 15. It can be nerve-wracking as many people prepare to file with the Internal Revenue Service (IRS). And scammers will capitalize on the pressure taxpayers are under.

“Regardless of how you choose to have your taxes prepared, you could encounter a scam attempt,” says Steve J. Bernas, president and CEO of the BBB. “As the 2024 tax season opens, tax scammers come out of the woodwork. They often start with fear, utilizing imposter phone calls, texts, emails, and phony letters playing on their target’s emotions.

Tax identity theft occurs when a scammer uses your Social Security number to file a tax return in your name and collect your refund. Scammers steal your tax information in several ways. It could be a phony tax preparation service, a data breach, a hack, or a phishing scam, where you are tricked into clicking on a link in a text message that downloads malware to your device.

Victims of tax identity theft typically don’t realize they’ve been targeted until they file their taxes or even later.

Email phishing scams appear to be from the IRS and include a link to a bogus website intended to mirror the official IRS website. These fraudulent emails direct you to update your IRS e-file immediately, or there is a problem with your taxes and sometimes mention USA.gov or a variation of the real IRS site. Scammers want you to call the fake number in the email or click on a link to steal money and ID information.

IRS impersonation scams most often start with a phone call and take two basic forms. In the first version, the IRS “agent” says you owe back taxes and pressures you into paying by prepaid debit card or wire transfer. The scammer threatens you with arrest and fines if you don’t comply. Scammers can also claim they are issuing tax refunds and need your information.

The scammer might even give a fake badge number and name or use a spoofed Caller ID, looking like it’s coming from an official agency.

Scammers usually try to push you into action before you have time to think and often insist that payment be made immediately by wire transfer, prepaid debit card, or other nontraditional payment methods, which are mainly untraceable and nonreversible.

“Ghost” shady tax preparers set up shop around tax time, usually in a vacant storefront. They will often promise tax filers fast or large refunds. These “ghost” tax preparers can be individuals who bypass checks and balances in the tax preparer certification system. You might lose your refund and pay high fees, and if something goes wrong with your return, they are nowhere to be found.

BBB tax time tips:

• Check out businesses before you hire them and a great place to start is at BBB.org.

• The best way to avoid tax ID theft is to file your taxes as early as possible before a scammer has the chance to steal your information and file a fake tax return.

• Always check out a new tax preparer before you do business with them. Visit BBB.ORG for ratings and reviews.

• Ask any tax preparer what security steps they will take to protect your data.

• Check out websites carefully and make sure you access the actual IRS website when filing your taxes electronically or inquiring for additional information.

• When in doubt, contact the IRS directly to verify any contact, not a number in an email or text.

• The IRS will never threaten you, demand immediate payment, require a specific form of payment, or ask for credit card or debit card numbers over the phone.

• Be wary of a tax preparer offering fast refunds or large returns. What you owe is solely based on your past year's tax information and the current tax laws.

• Only allow funds to be deposited into your personal accounts. Some ghost tax preparers will have funds deposited into their own accounts “to be later distributed.”

• Review your tax return before it's submitted to ensure it was correctly signed by your tax preparer.

• Be wary of spectacular promises. Avoid tax preparers who offer “refund anticipation loans” as you’ll probably lose a large percentage of your return to commission fees.

• Think about availability. If the IRS finds errors in your tax forms or decides to perform an audit, will your tax preparer be available to help you with the details?

• Contact the IRS immediately if you get: a written notice from the IRS about a duplicate tax return, a notice stating that you received wages from a company that you never worked for, or any notice that “additional taxes are owed, the refund will be offset, or a collection action is being taken against you.”

• Protect your Social Security number (SSN). Do not give out your SSN unless you are 100% sure you are dealing with someone you trust.

If you’ve spotted a scam (whether or not you’ve lost money), report it to BBB ScamTracker. Visit BBB.org or follow us @ChicagoBBB on social media. Look for the BBB seal, The Sign of a Better Business.