Why do people say if I were instead of if I was?

Because were is the subjunctive, a verb form English uses for situations that are hypothetical, contrary to fact, or wished for rather than real.

If I were you, I'd wait. — I am not you. Contrary to fact. I wish it were simpler. — it is not. If she were taller, she'd have made the team. — she is not.

Compare with a genuinely open possibility, where was is correct:

If he was at the meeting, he'll know. — he may well have been; I do not know.

So the test is whether the condition is real or imagined. If the statement is definitely false, or is a wish, use were. If it might actually be true, use was.

English has largely lost the subjunctive, which is why this survives as an isolated oddity rather than part of a visible system. It persists most strongly in fixed expressions — if I were you, be that as it may, far be it from me, come what may, God save the King.

It also appears in formal demands and recommendations, where the verb loses its usual ending: the board insists that he resign — not resigns. We recommend that the policy be reviewed. This construction is more common and more strictly observed in American English; British writing often uses should instead.

The subjunctive is genuinely receding. If I was you is common in speech and no longer raises many eyebrows, but it still reads as an error in edited prose.

A useful side note: the subjunctive is why if I was to tell you sounds slightly off where if I were to tell you does not. The construction is hypothetical by nature, so it pulls the subjunctive even when the speaker is not thinking about mood at all.