Legally Informed: Avoiding Tax Scams

Ohio Legal Help seeks to make the justice system more accessible so that people feel empowered to resolve their legal problems. Our blog series, Legally Informed, will help you understand important things to know when dealing with legal issues. This blog highlights tax scams to watch out for in 2025, but make sure you read our scams update from 2024.

If you think you have been scammed, visit the consumer resources on the Federal Trade Commission website and be sure to report it.

Common Tax Scams
 

Phishing and Smishing Scams

Scammers impersonate the IRS or other tax authorities through fraudulent emails, texts, or social media messages. These messages may claim to offer refunds, warn of audits, or request personal details. The IRS does not initiate contact via text or email, so never click on suspicious links.

What to do if you receive a suspicious email or text:

• Don't reply.
• Don't open any attachments. They can contain malicious code that may infect your computer or mobile phone.
• Don't click on any links. If you clicked on links in a suspicious SMS and entered confidential information, visit Identity Theft Central.
• For emails, send the full email headers or forward the email as-is to [email protected]. Don't forward screenshots or scanned images of emails because this removes valuable information. 
• For text messages, report the message to 7726 (SPAM). You should also email it to [email protected] and include both the Caller ID and the message body in your email. 
• Delete the original email or text message.

For social media scams:

• Report the added social media account to the appropriate social media provider.
• Include the full URL of the social media account and report the incident to [email protected], the Treasury Inspector General for Tax Administration (TIGTA), the Federal Trade Commission, and the Internet Crime Complaint Center (IC3).

Bad Social Media Advice

Social media, particularly TikTok, is a hotspot for inaccurate and misleading tax advice. Misinformation often includes misguided tips on handling tax documents like a W-2, sometimes even promoting improper usage. If you knowingly submit fraudulent tax returns, you could face significant civil and criminal penalties.

Fake IRS Online Account Help

Scammers may pose as a "helpful" third party, offering to assist in setting up a taxpayer's IRS Individual Online Account at IRS.gov. In reality, no help is needed, and the agency offers tips on how to sign up and avoid scams. The IRS Individual Online Account provides taxpayers with valuable personal tax information. But beware, these scammers aim to steal this personal information and may attempt to file fraudulent returns your name to claim a large refund.

Ghost Tax Preparers

Most tax preparers are trustworthy, but some engage in dishonest practices and disappear with your money. Be wary if a preparer:

• Bases their fee on the size of your refund.
• Refuses to sign your tax return. (Legitimate preparers must include their Preparer Tax Identification Number (PTIN)).
• Asks you to sign a blank or incomplete return.

Always work with a trusted tax professional for help.

False Tax Credit Claims

Fraudulent tax credit claims have become more common, with scammers misleading taxpayers into filing for credits they don’t qualify for. Some common examples include:

• Fuel Tax Credit Fraud: Intended for off-highway business and farming use, not the general public.
• Form 7202 Misuse: Designed for self-employed individuals claiming 2020-2021 pandemic-related sick and family leave credits.
• "Self-Employment Tax Credit" Scam: No such credit exists; What’s being referred to is a very limited sick leave credit, and many people don’t qualify.

Overstated Withholding Scams

A growing scam encourages taxpayers to file false tax forms (e.g., W-2, 1099) with inflated income and withholding amounts to receive a larger refund. They then file these false returns electronically in hopes of receiving money they’re not owed.  Fraudulent returns are subject to IRS review, and taxpayers caught engaging in this practice face severe penalties. Always use accurate tax documents from your employer.

Misleading Offers in Compromise

The Offers in Compromise (OIC) program helps people settle their federal tax debts when they can’t pay the full amount. However, some scammers falsely promote OIC to people who don’t qualify, often costing them thousands of dollars. You can check if you qualify for free using the IRS Offer in Compromise Pre-Qualifier tool.

Spear phishing and new client scams

Cybercriminals continue to target tax professionals through "new client" scams. They send emails with harmful links or attachments to steal client data. Spear phishing is a targeted scam that can steal both client data and the tax pro’s identity. Tax pros and businesses should watch for suspicious emails with odd wording or strange requests and never share sensitive info without checking. Scammers can also hack email accounts and use real messages to make their scam seem more convincing.

How to Report Tax Scams

• To report fraudulent tax preparers or abusive tax schemes, you can fill out and submit Form 14242 online.
• To report phishing scams, email [email protected].
• To report identity theft, visit Identity Theft Central.
• Taxpayers and tax practitioners may qualify for a monetary award through the IRS Whistleblower Office.

How to Take Action

• Warn others. Sharing scam information helps protect your friends and family.
• Did a business mislead or lie to you about their goods and services? Learn more about consumer fraud.
• Worried about identity theft? Monitor your credit. Check your credit for free annually at AnnualCreditReport.com.
• Use fraud alerts. If you suspect identity theft, place a fraud alert with one of the three major credit bureaus—Equifax, Experian, or TransUnion—and they will notify the others.
• Freeze your credit if needed. There is no cost to add a credit freeze, but it requires contacting each bureau separately.

By staying informed and taking precautions, you can protect yourself and your loved ones from tax fraud and scams.

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