Holiday Tax Scams: 'Tis the Season to be Wary

Christmas shopping online. Laptop and credit bank card on table at home on the background of a Christmas tree with blurred bokeh lights.

(Image credit: Getty Images)

Tax scams, unfortunately, happen year-round, but they surge during the holiday season. Scammers know that people are busy with year-end distractions like shopping, traveling, not to mention the approach of the tax filing season. And scammers are counting on the season's stresses to catch people off guard.

It doesn't help that scams have become more sophisticated, especially those that use AI-generated fake websites, emails, and texts that are convincing to the undiscerning, and sometimes, even the discerning eye.

The IRS is warning: Email addresses might be spoofed, communications might contain realistic-looking case numbers, and the use of caller-ID masking on phone calls.

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Even worse? Phone scams are sometimes carried out using deepfake AI voice software, where the voice generated sounds indistinguishable from a real person.

To help protect yourself, here are three of the most common holiday tax scams to watch out for.

Gift card scams

During the holiday season, requests for gift cards are common. Gift card scams might involve a fraudster contacting a taxpayer via email, text, or via social media, posing as an IRS official.

The scammer might:

Demand immediate payment to resolve a fake tax liability
Call or leave a voicemail informing the victim that they are linked to some criminal activity
Harass a taxpayer into paying a fictitious tax or tax penalty under threat of arrest or deportation

Victims are told to purchase gift cards to satisfy the amounts supposedly "owed." The scammer will then instruct the taxpayer to provide the gift card number or numbers and PIN.

To protect yourself, remember the IRS will never demand immediate payment of taxes by gift card. The federal tax agency will mail an official letter, including a statement of tax liability, to those who owe taxes.

Fake charities and charity tie-in scams

When it comes to charities, scammers pretend to be or to represent legitimate nonprofits like the Red Cross or Salvation Army, pressuring would-be donors to give quickly.

If the donor, for example, "acts before Christmas," the scammer usually promises that the donation will lead to special tax deductions resulting in larger refunds, or "holiday credits." If the donor gives, the money never reaches the charity; it goes into the scammer's pocket.

To avoid being taken advantage of, potential donors should:

Ask the fundraiser for the charity's exact name, website, and mailing address to independently confirm the information. Then use the IRS' Tax-Exempt Organization Search tool (TEOS) to verify if an organization is a legitimate tax-exempt charity.
Resist being pressured. There's no need to rush. Legitimate charities are happy to get a donation at any time.
Never give more than what is needed. Treat your personal information like cash and hold it close.
If payment is requested in any form other than check or credit card, it's a scam. Never work with a charity that requests charitable donations via gift card, peer-to-peer apps, cryptocurrency, or wire transfer.
Never pay unless or until you have verified that the charity is legitimate, and even then, you should initiate contact with the charity.

Phishing and smishing scams

With the use of generative AI, the credibility of emails, texts, and websites is greater than ever before.

As Kiplinger has reported, in a phishing scam, fraudsters send an email to trick people into revealing sensitive or personal information.
Smishing serves the same purpose, except the scammer send the message via text.
Scammers impersonate tax authorities to steal personal and financial data. Sometimes the impersonators demand money, but not always.

Don't click on links or attachments. That can compromise your computer or phone by installing malware that searches for personal and financial data on your computer's hard drive.

If you’re unsure, call the phone number posted on the IRS website to verify.

Tax scams: Bottom line

Unfortunately, scammers are a scourge we have to live with, be it at holiday time or at any time.

The best defense we have is to stay vigilant by keeping up our electronic security protocols, staying informed about events that may affect us, and reporting any scam we encounter to the IRS.

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Roxanne Bland, a self-styled “tax nerd,” has worked in the tax field for over 30 years as a state tax legal analyst. Before joining Kiplinger as a tax writer to help ordinary people make sense of their federal and state tax obligations, Roxanne spent many years covering developments in state tax jurisprudence at the U.S. Supreme Court and worked closely with state revenue agencies to develop uniform tax legislation. She has also contributed to Tax Notes State, a Tax Analysts publication focusing on cutting-edge corporate tax issues.