Adding Insult to Injury: Taxpayers Scammed by Con Artists

Updated July 2026

Nobody enjoys filing a tax return, and fewer still enjoy paying what’s owed. That basic frustration is exactly what con artists count on. They pose as IRS agents, or as “independent tax advisers” who are really just thieves in a cheap suit, and prey on people who just want the process over with.

The IRS has warned taxpayers repeatedly about a scheme where, for a fee, crooks help people file false paperwork claiming refunds they don’t qualify for, sometimes dressed up as a “stimulus payment.” There’s no such payment waiting for them. Filing false documents is illegal, full stop, and the taxpayer is the one on the hook. Even if a phony preparer walked you through it step by step, your name is on the return, and the IRS will come looking for you, not them.

Seniors, low-income households, and church congregations tend to get targeted hardest. The pitch is always some version of free government money. Cash changes hands for “help,” and by the time anyone realizes what happened, the scammer has vanished.

A favorite angle involves the American Opportunity Tax Credit. It’s a real credit, meant for students currently working toward a degree. But these operators tell people who graduated high school decades ago, with zero documentation and zero legal basis, that they can suddenly cash in on it.

It gets even more absurd. Some of these fake advisers have told people they can deduct taxes paid on groceries, as if grocery receipts somehow qualify someone for an education credit they were never eligible for in the first place.

Which Tax Scams Are Most Common in 2012?

The scams doing the most damage in 2012 all lean on one thing: people trust the IRS name. That trust gets weaponized. The agency’s annual “Dirty Dozen” list flags schemes aimed squarely at people with the fewest resources to fight back, including fake refund mills and identity theft rings.

One scheme that just won’t quit involves false eligibility claims for the American Opportunity Tax Credit (AOTC). Per the IRS, this credit is reserved for students in a qualified program during their first four years of college. Fraudsters ignore that entirely, telling people who sat in a classroom back in the 1970s or 1980s, degree or no degree, that they qualify today.

Social media, mass emails, flyers taped up at churches and community centers, these are the delivery methods. Some scammers even claim ties to the Federal Reserve or Experian, organizations that have nothing to do with any of this. The FTC has tracked cases of fake IRS letters landing in mailboxes across California, Texas, and New York.

The FTC’s 2012 Identity Theft Report put a number on the damage: over 1.4 million complaints, a 12% jump from the year before. A large share traced back to fraudulent tax filings.

Here’s a concrete case. A man in Miami got arrested in May 2012 for peddling fake AOTC claims. He charged $499 a return and filed for more than 300 people, most with no college history whatsoever. The IRS caught it during an audit. Had it worked, each fake refund would have topped out at $2,500, the AOTC’s max. It didn’t work. Nothing got approved.

How Do IRS Imposter Scams Work?

Phone calls, texts, emails, scammers now hit from every direction pretending to be the IRS. They’ll say you owe back taxes, threaten arrest, or dangle a refund if you just pay a small fee first. The FTC is blunt about this: the IRS always makes first contact by mail. Never by phone. Never by email.

Fake toll-free numbers show up constantly, often tied to a supposed “Taxpayer Assistance Center.” They’ll ask for your Social Security number, your bank details, sometimes even a prepaid debit card to “settle” a debt that doesn’t exist. None of that is how the IRS operates.

The agency has said outright that it won’t email you asking for personal or financial information IRS. Suspicious emails should get forwarded to phishing@irs.gov.

Older adults and people on tight incomes get hit the hardest. Take a 2012 case out of Dallas: a caller claiming to be from the IRS told a 78-year-old widow she’d be arrested unless she wired $5,000 through Western Union immediately. She sent the money before she figured out it was fake.

What Are the Real Consequences of Filing a False Return?

Filing a false return is a federal offense under Internal Revenue Code § 7206(1), punishable by up to three years in prison and a $25,000 fine. It doesn’t matter if a third party talked you into it. The IRS holds the person who signed the return responsible.

Take a taxpayer in Portland, Oregon who used a “free tax prep” storefront. The preparer filed a return claiming $12,000 in refunds built on fabricated education credits. The IRS flagged it, launched an audit, and the taxpayer ended up eating a $1,800 penalty plus a two-year audit delay.

Fake names and addresses show up constantly in these schemes. One supposed tax preparer in Phoenix operated under a business name registered to a dead person. Investigators eventually traced it back to a man in Indiana who’d built a shell company using stolen data.

Refusing to pay the scammer up front doesn’t fully protect you either. If the IRS flags suspicious activity on your return, it can freeze the refund entirely, sometimes for months, while the matter gets sorted out.

One honest caveat here: if you’ve already filed based on bad advice, you’re likely still liable. The IRS doesn’t accept ignorance as a defense. And if you’re dealing with limited English proficiency, low literacy, or financial pressure, you’re statistically more exposed to these schemes, even when you’re genuinely trying to do things right.

How Can You Verify a Tax Preparer’s Legitimacy?

Check credentials before you hand anyone your paperwork. The IRS keeps a directory of authorized preparers at IRS Form 13614. Look for a PTIN, the Preparer Tax Identification Number every legitimate preparer must carry.

Firms like H&R Block, TurboTax (owned by Intuit), and Jackson Hewitt operate under national standards. They’ll give you a written contract, and they won’t ask for full payment before your return is even filed. If someone demands money up front, that’s your cue to leave.

Look up complaints through the Better Business Bureau or the FTC’s Consumer Sentinel Network. In 2012 alone, over 12,000 complaints came in about tax preparers, a good chunk involving refund promises with zero documentation behind them.

Guard your Social Security number closely. Handing it to the wrong person opens the door to credit fraud in your name. Experian and TransUnion both offer monitoring that can catch suspicious activity early.

Picture this: you’ve got a 620 credit score and roughly $8,000 in medical bills piling up. That’s exactly the profile scammers look for. Someone calls promising “a $5,000 refund, right away.” It’s not real. The IRS doesn’t hand out refunds without a verified return behind them. Paying a licensed preparer $150 beats losing everything to a promise that was never going to pan out.

What Should You Do If You’re Targeted?

Got a suspicious call, text, or letter claiming to be the IRS? Don’t engage. Hang up, delete it, and report it directly through IRS.gov.

If you suspect your identity’s been stolen, call the IRS Identity Protection Specialized Unit at 1-800-908-4490. That unit handles identity theft cases directly and can help place a fraud alert.

The FTC has its own resource too. Head to IdentityTheft.gov to file a report and start recovery, including instructions for freezing your credit with Equifax, Experian, or TransUnion.

One more thing worth remembering: the IRS never asks for payment through prepaid debit cards, wire transfers, or cryptocurrency. Any of those requests should set off alarm bells immediately.

How Do Scammers Exploit the American Opportunity Tax Credit?

The AOTC lets eligible students claim up to $2,500 a year toward tuition and related costs. Qualifying requires at least half-time enrollment in a degree program, and the student can’t have already finished four years of higher education.

Fraudsters skip past all of that. They’ll tell someone who went to college in the 1980s, or never went at all, that they qualify anyway. Some even suggest grocery bills or car repairs count toward the credit. None of it is true.

Real claims require documentation, specifically Form 1098-T from the school. No form, no credit. Scammers claim they can work around this, sometimes using forged paperwork or stolen student IDs to fake it.

Remember that Miami case from earlier. The man operated under a business name registered in Delaware, charged $499 per return, and filed for over 300 people, most without any college history at all. An IRS audit unraveled the whole operation.

Bottom line: if you’re not a student with qualifying expenses, this credit isn’t available to you, no matter what anyone promises over the phone.

Frequently Asked Questions

Can the IRS call me to demand payment?

No, that’s not how it works. The IRS makes first contact by mail, always. FTC

Do I need to pay a fee to get my tax refund?

Not upfront, no. Legitimate preparers bill after filing is complete. Any fee demanded before that point is a scam. IRS

Can I claim the American Opportunity Tax Credit if I never went to college?

You can’t. Enrollment in a qualified education program is required, and claims filed without documentation are illegal. IRS

What if someone uses my Social Security number to file taxes?

Call the IRS Identity Protection Specialized Unit right away at 1-800-908-4490. IRS

Can a scammer claim a refund for me without my permission?

Unfortunately, yes. Identity thieves regularly file fraudulent returns with stolen data, which can hold up your legitimate refund. FTC

Are refunds available for expired programs like the Economic Recovery Credit?

They aren’t. That program ended in 2010, so any claim tied to it is fabricated. IRS

How do I know if a tax prep service is real?

Look for a PTIN on the IRS site, and steer clear of anyone promising refunds with no documentation required. H&R Block and TurboTax are reputable names to compare against. IRS

Can I be punished for filing a return with a scammer?

Yes, you can face penalties under Internal Revenue Code § 7206(1). Being misled doesn’t remove your responsibility. IRS

What should I do if I paid a scammer?

File a report with the FTC at IdentityTheft.gov and notify the IRS. Depending on your case, recovering funds through a refund process or legal action may be possible. FTC

Is it safe to use a prepaid debit card to pay taxes?

It’s not, and the IRS doesn’t accept them anyway. Scammers push prepaid cards specifically because they’re hard to trace. FTC