Understanding Tax Scams and Identity Theft During Tax Season

Tax season is a familiar annual task. You gather documents, file your return, and look ahead to refunds or next steps. Unfortunately, it is also one of the busiest times of year for scammers.

During tax season, individuals and businesses share some of their most sensitive information, including Social Security numbers, income details, and bank account data. Criminals take advantage of this increased activity, using tax scams and identity theft tactics to steal personal data and money.

In this guide, we will explain common tax season fraud tactics, how identity theft happens, and practical steps you can take to protect yourself.

Why is Tax Season the Prime Target for Fraud?

Every year, tax season creates a surge in financial activity and that surge creates opportunity for criminals. Individuals, families, and businesses are exchanging extremely sensitive information such as Social Security numbers, income details, and bank account data, often under pressure to meet deadlines or secure refunds as quickly as possible.

Scammers understand this behavior well. They design tax season scams to exploit moments of stress, urgency, and confusion. A message claiming your refund is delayed or that you owe back taxes can feel believable when you’re already navigating complex tax rules.

Several factors make tax season especially vulnerable:

• Urgency: Scammers pressure victims to act quickly, warning of penalties, garnishments, or lost refunds
• Authority: IRS impersonation messages rely on fear of government enforcement
• Complexity: Many people are unsure what the IRS will or won’t do, making scams harder to spot
• Data exposure: Information from prior data breaches fuels more personalized attacks

Understanding why tax season fraud occurs is the first step in protecting yourself and your personal data.

For individuals and businesses across Wisconsin and Minnesota, these scams often feel even more convincing because criminals frequently spoof local area codes or reference regional offices to appear legitimate. Even when a message seems local, it is important to slow down and verify the source before responding.

What Are Common Tax Scams to Watch Out For?

Tax scams evolve every year, but many follow predictable patterns. Knowing how these scams work and what they look like in real life can help you recognize suspicious activity before damage occurs.

1. IRS Impersonation Scams

IRS impersonation scams remain one of the most common forms of tax season fraud. Criminals pose as IRS agents through phone calls, emails, texts, or even social media messages. These communications often appear urgent and official, sometimes using logos, spoofed email addresses, or manipulated caller IDs.

Common claims include:

• You owe unpaid taxes and must pay immediately
• Your tax return contains errors that must be corrected
• Your refund is being withheld pending identity verification

In many cases, these scams involve email spoofing or links that lead to fake IRS websites designed to capture your personal data. The IRS does not initiate contact through email, text, or social media, which is an important distinction to remember.

2. Back Taxes Scam Calls

Back taxes scam calls are designed to trigger panic. Callers may threaten arrest, wage garnishment, or asset seizure if immediate payment is not made. Victims are often instructed to pay using gift cards, wire transfers, or cryptocurrency payment methods the IRS does not accept.

Wisconsin and Minnesota residents should be especially cautious of calls that reference state or regional tax offices. Scammers often use familiar locations or local sounding language to increase trust, even though the calls are not legitimate.

The goal is to create fear strong enough that you act before verifying the request.

3. Tax Relief Scam Calls

Tax relief scam calls promise fast solutions to overwhelming tax debt. While legitimate tax professionals can help with complex tax situations, scammers often:

• Demand upfront fees
• Guarantee unrealistic results
• Avoid written contracts or documentation

Always verify credentials and seek trusted, local guidance before engaging with any tax relief service.

4. Tax Refund Fraud

Tax refund fraud occurs when criminals file fraudulent tax returns using stolen personal information. Often, victims don’t realize what’s happened until their legitimate return is rejected or they receive an unexpected IRS notice.

Filing early and securing your tax accounts can significantly reduce this risk.

5. Phishing and Social Engineering Attacks

Phishing attacks use deception rather than force. Messages may appear to come from employers, tax software providers, or financial institutions and ask you to verify information or download documents.

These scams rely on social engineering manipulating emotions like fear or trust to gain access to your accounts or install malware.

How Identity Theft Happens During Tax Season

Identity theft during tax season often begins long before a scam message reaches you. Criminals collect personal data through a variety of channels, then wait for the most opportune moment to use it.

Common Sources of Stolen Data

Personal information is frequently exposed through:

• Large-scale data breaches at retailers, employers, or service providers
• Insecure public Wi-Fi networks
• Lost or improperly discarded documents
• Malware installed through phishing links or infected attachments

Once criminals have this information, they may attempt account takeover, open new lines of credit, or file fraudulent tax returns in your name.

This is why personal data protection and identity verification practices are essential especially during tax season, when sensitive data is frequently shared.

What Are Warning Signs of Tax Season Fraud?

Watch for these red flags:

• IRS notices about returns you didn’t file
• Unexpected tax transcripts or refund notifications
• Requests for sensitive data via email or text
• Unfamiliar charges or login alerts
• Locked or inaccessible tax accounts

Catching suspicious activity early can significantly reduce damage.

What Are Practical Steps for Identity Theft Protection?

Protecting yourself from tax season fraud doesn’t require advanced technical knowledge but it does require consistency and awareness. Taking proactive steps now can reduce your risk significantly.

Strengthen Your Tax Filing Security

Filing your taxes early is one of the most effective ways to prevent tax refund fraud. When your return is already on file, criminals have fewer opportunities to submit fraudulent returns using your information.

In addition:

• Use reputable, secure tax preparation services
• Avoid sharing tax documents through unsecured email
• Confirm website URLs before entering personal information

Protect Your Accounts

Strong account security is essential for financial identity protection. Use long, unique passwords for tax and financial accounts, and enable multi-factor authentication whenever possible. MFA adds an extra layer of protection by requiring a second form of verification beyond your password.

Pay close attention to alerts for unusual login attempts or changes to your account information.

Monitor Your Financial Identity

Ongoing monitoring is critical because identity theft doesn’t always happen immediately. Criminals may wait months before using stolen data.

Consider:

• Enrolling in credit monitoring services
• Setting up fraud alerts with credit bureaus
• Reviewing bank and credit card statements regularly

Early detection can prevent long-term damage and simplify recovery.

Build Strong Cybersecurity Awareness

Practicing everyday cybersecurity awareness can dramatically reduce risk. Be cautious with unsolicited messages, verify requests independently, and keep your devices and software up to date.

These habits form the foundation of effective fraud prevention.

What to Do If You’re Targeted or Become a Victim

If you believe you’ve been targeted by a tax scam or identity theft:

1. Stop engaging with the suspected scammer
2. Do not provide additional personal information
3. Report the incident to the IRS and appropriate authorities
4. Place a fraud alert or credit freeze if necessary
5. Contact your financial institution immediately

For Wisconsin and Minnesota residents, reporting suspected tax fraud promptly and working with trusted local financial partners can help protect not only your own accounts, but also others in your community. Local institutions are often familiar with regional scam patterns and can help guide next steps.

Prompt action can prevent further damage and speed recovery.

Staying One Step Ahead This Tax Season

Tax season does not have to feel overwhelming or risky. By understanding common tax scams, strengthening your personal data protection, and staying alert to suspicious activity, you can significantly reduce your risk of fraud.

Simple habits like filing early, using secure tax filing tools, monitoring your accounts, and questioning unexpected requests for information can make a meaningful difference. Identity theft protection is not a one-time task. It is an ongoing process that supports your long-term financial health.

As a community-driven financial partner, Forward Bank is here to help you navigate tax season with confidence. If you have questions about fraud prevention, identity theft protection, or secure banking tools, our team is always ready to help.

Our mission is simple: to move our communities forward.