Tax fraud has hit staggering new heights. The IRS reported $9.1 billion in fraud from tax and financial crimes last year, a figure that underscores the growing sophistication of scams targeting taxpayers.
With the rise in digital tax filing, over 140,000 taxpayers used Direct File across 12 states last year, cybercriminals have more opportunities than ever to exploit vulnerabilities. While the IRS continues to bolster its security, the burden of protecting personal data ultimately falls on taxpayers.
AI Is Supercharging Tax Scams
Scammers have gone high-tech. Artificial intelligence is now a key weapon in their arsenal, allowing them to craft eerily convincing phishing emails and texts that mimic official IRS correspondence. AI-generated messages can include real taxpayer details, making them harder to spot and even harder to ignore.
"In the midst of tax season, it’s increasingly important for individuals to be aware of the potential threats to their identity and the likelihood of fraud," says Patrick Harding, Chief Product Architect at Ping Identity. "With more people filing taxes digitally and threat actors capitalizing on AI technology, online tax scams are becoming more sophisticated and prevalent. In particular, individuals need to remain alert to potential phishing scams posing as trusted institutions, like the IRS."
How to Spot AI-Generated Tax Scams
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 numbers appear as “IRS” or “Federal Government” on caller ID. If you get an unexpected call, hang up.
Password Hygiene: The Silent Weak Spot
Weak passwords continue to be a major problem, making it easier for scammers to break into tax-related accounts. A recent study found that 72% of people use only three unique passwords across multiple logins, and 12% use the same password for everything.
"Individuals should also avoid password sharing or reusing passwords for different platforms to protect their digital identity and tax-related personal data," Harding adds. "This tax season, it’s important to practice better password hygiene to avoid stolen credentials or compromised financial accounts and choose businesses that have adopted passwordless and zero-trust approaches for added resilience."
The Fake Tax Preparer Problem
Tax fraud isn’t just happening through phishing emails. Scammers are posing as professional tax preparers, promising fast returns and big refunds—only to steal personal and financial data.
Red Flags of Fake Tax Preparers:
Unrealistic Refund Promises: If it sounds too good to be true, it probably is.
No Preparer Tax Identification Number (PTIN): Legitimate preparers must have one. Always ask for it.
Pressuring You to Sign Before Reviewing Your Return: This is a major red flag. Never sign a return without checking every detail.
The IRS Crackdown: New Security Measures for 2025
The IRS is implementing new security measures to combat fraud, including:
A Fuel Tax Credit Statement: Designed to prevent people from falsely claiming this credit.
Stricter Withholding Claim Reviews: To reduce fraudulent refund claims.
Despite these measures, scammers continue to find loopholes. The IRS has warned of new fraud rings targeting mailed refund checks, a problem that has already resulted in millions of dollars in stolen refunds.
“You Owe Back Taxes” Scams Aren’t Going Away
Scammers posing as the IRS on phone calls remain one of the most effective—and terrifying—ways to steal from taxpayers.
"While it can be tempting to rush through your tax return filing as quickly as possible, it’s important to remain diligent throughout the process to protect your finances from both commonly used scams and emerging threats," says Sean Murphy, PhD, CISO at BECU.
Murphy warns that scammers use fear tactics, posing as IRS agents or financial institutions to convince victims they owe back taxes or penalties. Some even threaten immediate arrest unless payment is made via gift cards, wire transfers, or cryptocurrency.
How to Protect Yourself from IRS Imposter Calls
Hang up immediately. The IRS never demands immediate payment over the phone.
Report the scam. Contact the Treasury Inspector General for Tax Administration (TIGTA).
File early. The sooner you file, the less likely a scammer can file in your name.
Protecting Yourself: What You Need to Do Now
As tax fraud continues to escalate, experts stress that individuals need to take proactive measures to safeguard their data.
Enable multi-factor authentication (MFA) on all tax-related accounts.
Use strong, unique passwords—and never reuse them across multiple accounts.
Vet tax preparers carefully before sharing sensitive information.
Monitor your credit report for suspicious activity after filing your return.
Stay alert to scams like vishing (voice phishing), which are growing more sophisticated.
"If someone suspects they are a victim of fraud, they should reach out to their financial institution immediately to mitigate any potential losses," Murphy advises.
The Bottom Line
Tax fraud is evolving, with scammers using AI, stolen credentials, and old-school fear tactics to steal billions. While the IRS is stepping up security, taxpayers must remain vigilant. With better cybersecurity habits and a healthy dose of skepticism, you can keep your refund—and your identity—out of the hands of criminals.
For more information on recognizing and reporting tax scams, visit the IRS’s official fraud prevention page.