Tax Fraud and Charity Scams: Protecting Your Refund and Generosity
Tax fraud and charity scams cost Americans billions every year. Scammers file fake tax returns using stolen identities, set up as "ghost preparers" who steal refunds, and create fake charities that exploit your generosity during disasters. Here is how to recognize and avoid each type.
Tax-related identity theft occurs when someone uses your stolen Social Security number to file a fraudulent tax return and claim your refund before you file. The IRS estimates it has prevented over $20 billion in fraudulent refunds since 2011, but the problem persists. Charity scams spike during natural disasters and the holiday season, when people are most likely to donate to causes they care about. Together, these two fraud categories exploit two of the most vulnerable moments in personal finance: tax season and charitable giving.
Real-world example: During the 2024 tax season, scammers posed as IRS agents, calling taxpayers and threatening arrest if they did not immediately pay "unpaid back taxes" via gift cards. Victims lost thousands before realizing the IRS never demands payment via gift cards. Meanwhile, after the 2023 Hawaii wildfires, over 200 fraudulent charity websites appeared within 48 hours, collecting donations for victims that never reached a single survivor.
Tax-Related Scams
Tax Identity Theft
Thieves use stolen Social Security numbers to file fraudulent tax returns early in the season, claiming large refunds before the real taxpayer files. The legitimate taxpayer only discovers the fraud when their e-filed return is rejected because one has already been filed under their SSN. If you cannot e-file because a return has already been filed under your SSN, contact the IRS immediately at 1-800-908-4490 and complete Form 14039 (Identity Theft Affidavit).
Ghost Preparers
Unscrupulous tax preparers who charge a fee but do not sign the return as a paid preparer — they stay "ghost" to avoid responsibility. Ghost preparers often promise inflated refunds, fabricate deductions, direct refunds to their own accounts, or charge fees based on a percentage of the refund (which is illegal). Always use a licensed tax professional who signs the return with a Preparer Tax Identification Number (PTIN) and provides a copy of the completed return.
IRS Impersonation Calls
Scammers call claiming to be from the IRS, demanding immediate payment for unpaid taxes. They threaten arrest, deportation, or license revocation. The IRS will never call demanding immediate payment, demand payment via gift cards or wire transfer, threaten arrest, or ask for credit card details over the phone. If you receive such a call, hang up and report it to the Treasury Inspector General for Tax Administration (TIGTA) at 1-800-366-4484.
Phishing for Tax Information
Emails claiming to be from the IRS, tax software companies, or state tax authorities, requesting that you "verify your identity" or "update your tax information." The IRS does not initiate contact by email, text, or social media. Forward suspicious emails to phishing@irs.gov.
Fake Tax Debt Relief
Companies claiming they can settle your tax debt for "pennies on the dollar" through an "Offer in Compromise" program. While legitimate Offer in Compromise programs exist, scammers charge large upfront fees for services you could complete yourself or for programs you do not qualify for. Most people who pay for these services end up worse off.
Charity and Disaster Scams
Fake Charities
Scammers create fake charity names that sound legitimate — similar to real organizations or incorporating trending keywords. They set up websites, make phone calls, and send emails soliciting donations for causes that do not exist. After natural disasters, fraudulent charities appear within hours. Always verify a charity before donating. Use tools like the IRS Tax-Exempt Organization Search, Charity Navigator, GuideStar, or the Better Business Bureau's Wise Giving Alliance.
Disaster Relief Scams
After hurricanes, wildfires, floods, or earthquakes, scammers pose as disaster relief organizations collecting donations for victims. They may also impersonate FEMA officials contacting victims about "application fees" for assistance. Legitimate disaster relief organizations never charge fees to apply for assistance.
Donation Page Cloning
Scammers clone legitimate fundraising pages on platforms like GoFundMe, replacing the bank account details with their own. Always check the URL carefully and verify the organizer's identity. Use secure payment methods — credit cards offer more fraud protection than wire transfers, cash, or cryptocurrency.
Crowdfunding Fraud
Fake medical, education, or emergency fundraising campaigns on crowdfunding platforms. Some scammers exploit real tragedies by creating duplicate campaigns. Others invent entirely fictional emergencies. Look for campaigns with vague details, no updates, and organizers who refuse to provide verification.
Red Flags and Warning Signs
For tax scams: any unexpected contact from someone claiming to be the IRS, especially demanding immediate payment; preparers who promise unusually large refunds without reviewing your documents; preparers who do not sign the return; phishing emails about tax refunds or account problems. For charity scams: high-pressure donation tactics; refusal to provide detailed information about programs; names very similar to well-known charities; requests for cash, wire transfers, or cryptocurrency; no online presence or legitimate reviews; refusal to provide a tax ID number for receipt purposes. If you are unsure about a charity's legitimacy, donate to established organizations you have researched independently rather than responding to unsolicited requests.
How to Protect Yourself
File your tax return as early as possible, before identity thieves can file a fraudulent one. Use strong unique passwords for your tax preparation software and IRS online accounts. Enable two-factor authentication on tax software accounts. Never respond to unsolicited communications claiming to be from the IRS. Verify charities using the IRS Tax-Exempt Organization Search tool before donating. Keep records of charitable donations. When donating after a disaster, give to organizations with established disaster relief programs rather than newly created funds. Use credit cards for donations when possible — they offer fraud protection that wire transfers and cryptocurrency do not. If you are a victim of tax identity theft, complete IRS Form 14039, respond to any IRS notice promptly, continue to pay your taxes even if your return is delayed, and consider an Identity Protection PIN (IP PIN) from the IRS for future tax years.