How Do I Repair My Credit After A Tax Scam?
Despite all your diligence, it happened. You’ve been so cautious over the years, but someone finally slipped through the cracks and took you by surprise. Through a simple phone call, you were fooled. You fell for a tax collection scam.
Everyone makes mistakes, but falling for a tax collection scam can be a terrifying one to make. Unfortunately, they are getting more and more common as the IRS continues to outsource their collection calls. The scammers are always one step ahead in this game, and consumers are the victims.
So what happens next? If these scammers got hold of your personal information, what are you supposed to do to protect your credit score and your bank account? Can you get your money back, or fight your case in court? What does the IRS recommend for recovery, and how can you make sure you never fall for a tax scam again?
There are a couple of different ways tax scams can happen. For one, the scammer might already have had your personal information, and filed your federal tax refund under your social security number to steal your return. If this is the case for you, you will need to take the proper measures to protect your personal information and secure your identity.
However, there is also the possibility that a scammer called you or contacted you through email, social media, texting (this is known as phishing), or over the phone. If this was the case, there’s a chance that you may suffer a financial loss, but your credit score might not be at risk, unless you gave out some of your personal information.
No matter what scenario you find yourself in, let Fiscal Tiger help you navigate these dark waters as you work your way through recovering from an IRS scam.
Table of Contents
- 1 Scenario One: Your Identity Was Stolen and Your Taxes Were Filed
- 2 Where Do I Start? — Protect Your Credit Score and Identity
- 3 Repairing Your Credit
- 4 Scenario Two: You Fell For a Phishing or Phone Scam
- 5 What About Repayment Plan Scams or Tax Liens?
- 6 Where Do I Start? — From Calling the IRS to Your Credit Score
- 7 Staying Vigilant
Scenario One: Your Identity Was Stolen and Your Taxes Were Filed
If the first scenario happened to you — where someone has your personal information and filed your taxes under your name with the intent of stealing your federal refund— then you might be in some deep water. For one, these scammers have your personal information, including your Social Security Number (SSN), which means your credit score and all of your connected personal benefits could be at risk. Additionally, if the scammer filed your taxes, most likely they filed them incorrectly. This means the IRS potentially could come after you for an audit, or you could be on the hook to pay a tax bill without knowing it.
Where Do I Start? — Protect Your Credit Score and Identity
Because of these risks, it is vital for you to be diligent in notifying the IRS and the FTC about your stolen identity as soon as possible. You will also need to notify the three major credit bureaus and ask them to put a “fraud alert” on your credit score, or freeze it altogether. This will help protect your score in case anyone tries to use your personal information to open a new line of credit or loan account.
When someone has stolen your information and filed your taxes, you will either receive a notice by mail after filing your annual return, or your e-file will be rejected entirely. This means you will have to file a special form — Form 14039 — with the IRS so they can receive your accurate tax return. They will also need copies of your SSN card and a government issued ID. Once you begin the process to file your accurate tax return, you should be safe from falling under the IRS’s auditing radar. However, you will still need to take the necessary steps to protect your identity and ensure you are safe from future identity theft.
Repairing Your Credit
However, if you’re filing your taxes late and notice that your return is rejected due to someone else having already filed under your name, it’s possible that this scammer has had your information for a few months. Who knows what they could have done to your credit!
If this is the case for you, check to see if your credit score has been affected at all, and find out if you have some fraud and other damaging items now entered in your credit history. Unfortunately, once you’ve gotten things cleared up with the IRS, fixing your credit is the same slog as with any other instance of identity theft, and you will need to work on repairing your credit to make up for any damages caused.
Get your report, find errors or fraudulent accounts, and either retain a professional repair company, or start working directly with the bureaus on your own to set things right. Remember that credit repair companies are likely to be faster than you doing things on your own.
In the future, the best way to avoid letting this scenario happen to you (again) is to file your tax return as soon as possible. Since the IRS will only accept one yearly file per social security number, the sooner you file, the less likely someone who stole your information can file it first.
Scenario Two: You Fell For a Phishing or Phone Scam
Phone and phishing scams are becoming an increasingly popular way for scammers to make money in our modern age. The way they work is quite simple, and it’s surprisingly easy to fall into the trap that they’ve set, if you’re not prepared.
Phishing scams take place online — either through social media, email, or on websites that pretend to work with the IRS — but use similar tactics as phone scammers. Both forms of scamming will often use threats or intimidation to force the hand of the consumer. Some scammers will yell, use profanity, threaten legal action or arrest, or will even threaten the wellbeing of close family members. This is a major red flag that the person on the phone call does not work with the IRS, since all collection agencies have to follow the rules and guidelines of the Fair Debt Collections Practices Act (FDCP).
However, people often don’t consider the red flags when their lives are in danger. Sometimes these threats can feel too real, and you — the consumer — is more concerned about your personal safety.
What About Repayment Plan Scams or Tax Liens?
If you had already set up a repayment plan with the IRS, but still fell for a scam, the IRS will want to know about your situation, too. Unfortunately, the IRS is unable to do anything about the money that you lost, but they should be able to give you some piece of mind on what you need to do next. Additionally, if you lost money through a scam, the IRS can potentially work with you to help navigate your repayment plan.
Additionally, tax scammers will often threaten you with a tax lien from the IRS. This is a valid concern, as tax liens can have an effect on your credit score, and can be issued if you owe any money to the IRS.
However, the IRS is the only entity that is able to issue a tax lien. Although collection agencies are in charge of collecting the money you owe, they have no power to issue a lien, and thus cannot threaten you with one. If a collection agency threatens you with a lien, you can consider that as a red flag that the person on the line with you might be a scammer.
Where Do I Start? — From Calling the IRS to Your Credit Score
Whether you fell for a phone scam, or fell for a phishing (email) scam, the first thing you need to do is contact the IRS directly. This way you can both inform the IRS of the scam, and discover if you really do have taxes that are owed.
As for your credit score, the only way it could be at risk from a scam is if you gave your personal information to the scammer over the phone. Sometimes the scammers will ask leading question — such as, “We need to verify your information, so please provide your social security number…” — which means you could have given away sensitive personal information, exposing yourself to identity theft. If this was the case, you will need to follow through the same process as was mentioned in scenario one: report a fraud alert to the credit bureaus, and contact the IRS, the Social Security Office, and the FTC about your stolen identity. If you sent money through a bank transfer, you may need to notify your bank as well so you can change your bank account information.
Outside of reporting the fraud, you’ll want to keep a watchful eye on your credit score. Even if you missed the signs of a scam, or didn’t see any suspicious activity after the scam, a sudden drop in your score may tell you that something is amiss. Always stay vigilant about your score, and you’ll be able to navigate through any potential setbacks.
One of the best things you can do for yourself (and your bank account) after falling for an IRS scam is to consider the red flags that you might have missed. Did you ever receive a letter in the mail from the IRS? Did the scammer demand payment using extortion methods? What — if anything — might have set off some warning signs in your head?
Unfortunately, it might be too late to notice those signs, but it’s not too late to share your story and inform the IRS. The IRS is constantly trying to stay on top of these scams so that the public can remain informed, but they will only know about new scams if you contact them directly.
Additionally, knowing these red flags and staying notified by checking the IRS’s website regularly can help you be more cautious in the future, in case another scammer tries to contact you.
Realizing you fell for a tax scam can be devastating, but it doesn’t have to completely ruin your life. Luckily there are ways to protect your identity, work with the IRS, and get yourself back on track to being fiscally responsible.
Looking for more credit score resources? Visit the Fiscal Tiger credit score learning center for more tips and guides. Have you found other errors on your credit report? Learn how to contact the credit bureaus and fix them at our dispute letter template center.
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Katie McBeth is a researcher and writer out of Boise, ID, with experience in marketing for small businesses and management. Her favorite subject of study is millennials, and she has been featured on Fortune Magazine and the Quiet Revolution. She researches SEO strategies during the day, and freelances at night. You can follow her writing adventures on Instagram or Twitter: @ktmcbeth
This post was updated February 28, 2019. It was originally published September 9, 2017.