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Digital Payments, Phone Scams Grow in Tax Season

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What You Need to Know

  • Digital payment of taxes has been growing steadily.
  • Survey findings suggest a vulnerability among taxpayers who are more comfortable sharing financial information.
  • Taxpayers must be vigilant in tax season: The IRS will never contact you by phone, email or text.

Twenty-one percent of millennials report that they experienced phone scams during the current tax season, compared with 17% of baby boomers, according to survey results released this week by ACI Worldwide, a software company, and YouGov.

This represents a shift from 2020, when 23% of boomers and 18% of millennials said they had experienced tax season phone scams.

“The survey sheds light on a likely vulnerability with taxpayers who tend to be more confident about sharing their financial information,” Sanjay Gupta, executive vice president of ACI Worldwide, said in a statement. 

“As digital payments continue to grow, taxpayers need to be more vigilant during tax season. Arming themselves with information on the latest tax scams is the first step. It’s also important to note that the IRS never contacts taxpayers by phone, email or text.” 

YouGov conducted the online survey Feb. 9 and 10 among 1,237 U.S. adults. 

Digital payment of taxes has been growing steadily, according to the ACI and YouGov study. This year, 55% of survey participants plan to pay their taxes using digital methods, compared with 50% who did so in 2020 and 46% in 2019. 

At the same time, use of cash and other non-digital methods of payment, such as checks, has continued to decline. Twenty-six percent of respondents said they would pay their taxes using cash or check in 2021, compared with 32% in 2020. 

ACI noted that its 2020 tax payment data showed that taxpayers in a majority of states opted to use a debit card as the preferred method of paying taxes. In the last three years, however, taxpayers in some states preferred credit cards to debit cards closer to the tax deadline. 

“As stimulus checks were received around May last year, it is likely that many taxpayers had the ability to pay their taxes without the need for credit card payment plan options, which has driven the use of debit cards over credit cards,” Gupta said. 

“In some states, like California, consumers are typically paying higher sums in taxes, which could be one reason for the preference of credit card payments for payment financing over debit card payments.” 

Other Findings

YouGov data showed that 43% of U.S. adults this year planned to file their taxes electronically through software such as TurboTax, down slightly from 45% who planned to use this method in 2020. This included 51% of Gen Xers, the same percentage as last year, and 40% of millennials, down from 47% in 2020. 

Meanwhile, 7% of respondents planned to file their taxes through mail/paper only, compared with 8% last year. Twenty-five percent filed or planned to do so via a tax preparer electronically or by mail, including 29% of those older than 55.

In another finding, YouGov data indicated that 30% of survey participants said their tax refund was typically larger than their average paycheck, compared with 33% who said this in 2020. 

Seventy-nine percent said they chose to receive their tax refund by direct deposit rather than mailed check, up from 74% in 2020.

According to YouGov data, more taxpayers this year are aware of various types of payment fraud during tax season than they were in 2020:

  • Phone scams: 68% in 2021 vs. 65% in 2020.
  • Identity theft: 64% vs. 65%. 
  • Email scams: 63% vs. 61%. 
  • Illegal tax preparer: 40% vs. 38%. 
  • Ghost preparers: 24% vs. 20%. 

“As we head into the 2021 tax season, it’s important to note that the uncertainty of the pandemic has left many unsure of how to handle taxes based on their unique situations,” Gupta said. “For many who are struggling to pay bills as a result of the pandemic, a tax refund could be extremely beneficial, and receiving the refund quickly would be advantageous. 

“For others, including those who expect to owe taxes this year, anything that could delay the payment without penalty so that they have time to get their finances in order may be best.” 

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