Watch Out for and Help Protect Yourself From 2025’s Trending Tax Scams

Tax scams remain an ongoing threat which cost billions of dollars annually. Scammers are especially active during tax filing season. While some thieves target sensitive personal information to steal an identity, others are after your tax refund and credits. With the opening of 2025 tax season, filing promptly and being vigilant can go a long way in mitigating some of these threats. Here are a few scams to be aware of, along with steps you can take to help stay safe.

Scam #1: Income tax identity theft

While not a new scam, income tax identity theft remains a significant problem. Tax-related identity theft occurs when criminals steal people’s Social Security numbers and attempt to file false returns to claim refunds and credits that belong to others. They often report false income, deductions, and credits in a false tax return, aiming to increase the refund amount. Such theft can delay legitimate refunds due to the time-consuming process of rectifying IRS discrepancies. Ultimately, safeguarding your Social Security number and other personal information is key to helping prevent income-tax identity theft. Being proactive in tax planning, and being mindful of the following tips, can help protect you as well:

• File early: Filing your income tax return as early as possible, before thieves have had a chance to use your information fraudulently, can help reduce the risk of someone filing a false return in your name.
• Obtain an identity protection (IP) PIN: You can help prevent tax refund fraud by obtaining an identity protection PIN (IP PIN) from the IRS. An IP PIN is a six-digit number that prevents someone else from filing a tax return using your Social Security number (SSN) or individual taxpayer identification number (ITIN). The IP PIN is known only to you and the IRS. It helps the IRS verify your identity when you file your electronic or paper tax return. A new IP PIN is generated each year for your account.
• Monitor your accounts: Regularly review financial accounts, credit reports, and tax documents for any unusual or unauthorized activity.

Scam #2: Fake charity scams

Because taxpayers may be able to claim a deduction for money they donate to certain organizations, fake charities are another scam you should be concerned about. According to the IRS, charitable contribution scams are on the rise, often targeting higher-income taxpayers.¹ You can help protect yourself against this scam by always checking the validity of any charity before you donate. The IRS has a search tool to help you find vetted charitable organizations.

Scam #3: AI-generated scams 

Artificial intelligence (AI) is now a key weapon in scammers’ arsenals, allowing them to craft eerily convincing phishing emails and texts that mimic official IRS correspondence. AI-generated messages can even include real personal details, making them harder to spot and even harder to ignore. With more people filing taxes digitally and the scam threat actors capitalizing on sophisticated AI technology, be extra vigilant for:

• Phishing emails: Look for grammatical errors, suspicious links, and urgent language demanding immediate action.
• Fake IRS notices: The IRS never initiates contact via email or text. Always verify messages through their official website.
• Spoofed caller ID: Scammers can make their phone number appear as though it’s from the “IRS” or “Federal Government” on caller ID. If you get an unexpected call, hang up and block the number if available.

Scam #4: Fraudulent tax return preparer scams

The IRS has issued continued warnings reminding taxpayers to take care when choosing tax return professionals.² Most tax return preparers are licensed, and provide honest, high-quality service. However, some may cause harm through fraud, identity theft, and other scams.

There are warning signs that can help steer taxpayers away from these unscrupulous tax return preparers. For instance, not signing a tax return is a red flag that a paid preparer is likely not to be trusted. Any tax preparer who fails to sign and include their valid Preparer Tax Identification Number is violating the law. If your return is missing a signature or the preparer’s ID or PTIN number, it’s a red flag that they “may be looking to make a quick profit by promising a big refund or charging fees based on the size of the refund,” according to the IRS.²

Other signs you may be dealing with a fraudulent or “ghost” preparer include:

• Asking for cash payment without providing a receipt.
• Falsifying income information on your return to get tax credits.
• Making up fake deductions to boost the size of your refund.
• Having clients’ direct deposit refunds sent to their own bank accounts.

Remember, the taxpayer is ultimately and legally responsible for all the information on their income tax return, regardless of who prepares it. Always remember to:

• Review your tax return carefully once it’s completed.

• Don’t hesitate to ask questions about things you don’t understand.
• Always verify the routing and bank account numbers on your return.

Scam #5: IRS phone scams

The IRS phone scam can have many variations. One scenario is that you receive a call about a surprise tax bill you need to pay immediately to the IRS, with the threat of arrest if not paid immediately. The caller can sound quite convincing and even have the last four digits of your Social Security number.  Don’t be fooled by that.

If you’re told to submit payment either by wire or by prepaid debit cards, know this: The IRS will never contact you by phone asking for money.  The agency communicates payment information exclusively through either regular or certified U.S. Mail. If you receive a call or message supposedly from an IRS agent, hang up immediately, block the number and report the details to the IRS by sending an email to: phishing@irs.gov.

Scam #6: Tax settlement scams

Another common scam tries to take advantage of the IRS’s Offer in Compromise (OIC) program.  An OIC is a legitimate, long standing IRS program that allows qualifying taxpayers to work with the IRS to settle tax debts for less than the full amount owed.  It is an option for those who may be unable to pay their full tax liability, or if doing so creates undue financial hardship. In determining eligibility, the IRS considers each taxpayer’s unique situation. The OIC agreement occurs directly between the taxpayer and the IRS.

Taxpayers should be cautious of OIC mills, which make exaggerated claims through radio and TV ads about settling tax debts inexpensively. In reality, these mills often charge excessive fees, and taxpayers end up paying for a service they could have obtained directly from the IRS. Instead, use the IRS’s Offer in Compromise Pre-Qualifier tool to determine if you qualify for the program.

For more information, contact your Mercer advisor. If you’re not a client, let’s talk.

¹ “IRS alert: Charitable contribution scams on the rise; taxpayers beware of those promoting fraudulent schemes.” IRS, 4 December 2024. 

² “IRS: Take care when choosing a tax return professional.” IRS, 1 February 2024.

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