‘Tis the season…to get your taxes in order. Between now and April 15, you gather together all the relevant forms and receipts, and then submit them and more forms to the IRS. This is also the time of year to be on high alert for proliferating tax scams.
Scams happen all the time, all year-long. But tax time brings with it its own specific variations on common frauds. Scammers play on citizens’ desire to keep and/or get as much of their money as they can. And they play on fears that some form could be filled out wrong, or that an audit is looming.
By learning more about tax scams, you stand a greater chance of avoiding them and protecting yourself, your money, and your private information. The following are five of the most common kinds of scams that tend to crop up during tax time:
1. Refund Fraud
This is what many scammers are after: your tax refund. To get it, a scammer steals a person’s Social Security Number and then files a false return.
To maximize the refund amount, these scammers will claim a relatively low income but with high deductions. They will file electronically to have any refund directly deposited into an account.
This scam relies on speed. Whoever files with a specific SSN first wins. To avoid this scam, plan on filing as early as possible. Don’t give your SSN out to anyone. And see if you can get an Identity Protection PIN from the IRS, which acts much like two-factor authentication to prove your identity.
2. Phony IRS Agents
Some scammers will take to the phone and impersonate IRS agents to get people to part with identifying information. They may claim that there’s something wrong with your return, or that it looks like someone else may be trying to file using your name or SSN. There’s an outstanding tax bill that you have to pay, or you will be arrested. They may even have possession of the last four digits of your SSN, and your caller ID could even say “Internal Revenue Service.”
These calls are intended to scare you and keep you from thinking straight. That way, they can panic you into making payments over the phone or giving over some other sensitive information.
Calls like these are unnerving. But you just need to keep the following fact in mind: the IRS never calls to ask for money. Anyone that attempts to represent the IRS to that effect is a fraud. And that caller ID? A spoofed phone number.
3. Fake or “Ghost” Tax Preparers
Other scammers may decide to impersonate professional tax preparers to get people’s info. Complicated and changing tax laws often put laypeople on edge. If it’s anything other than an EZ form, they may start looking for professional help.
“Freelance” accountants may all of a sudden appear on social media or classified ads sites, offering their services. They may even offer to file your taxes for very low fees, or promise you higher refunds than you could get elsewhere.
Anyone who low-balls you for their time or suggests you can refunds through them that you can’t get anywhere else are red flags of tax scams. Tax laws are supposed to apply to everyone. Only criminals would suggest otherwise.
If you do decide to move forward with a professional, make sure they are certified (CPA). And look over the completed return closely before agreeing to file. Make sure salary and deduction amounts entered look legitimate, that the return is signed, and that any direct deposit information is to your banking account.
4. Phishing Emails
Any time of year, email is an effective and preferred approach for scammers to take. When it comes to tax scams, you could see emails that are supposedly from the IRS or associated agency. Or they could be advertising tax preparing services.
Much like a phone call, phishing scammers will use overly urgent language and out-and-out lies to get money or information. See this article on phishing to help you recognize common elements.
When it comes to the IRS, remember, they do not tend to use email to communicate. And if it’s a supposed tax professional, that old adage is true. If it seems too good to be true, it probably is.
5. Fraudulent Deductions
Some scammers may suggest ways for you to either increase your refund or reduce your annual payout. They may suggest tax shelters, in which you could invest and avoid paying taxes. Or they may even have you consider moving your money offshore. Except both of these instances could result in you losing your money to a scammer and facing persecution for attempting tax fraud.
It is certainly tempting to try and keep as much of your money as possible. But you don’t want to break the law in the process of doing so. Anytime someone suggests going above and beyond what seems normal to you, always try to get a second opinion from a financial expert you know and trust.
For more information about scams during tax season or year-round, read all about them on the PeopleFinders Blog.
Image credit: Billion Photos – www.shutterstock.com
