Don't Fall for these 4 Top Tax Scams
Tax fraud looks a lot like regular financial fraud—it costs you money and causes you a lot of frustration.
The good news is that if you’re taking steps to protect yourself against identity theft and credit card fraud, you’re on the right track to preventing your tax refund, personal information and money from falling into the wrong hands.
But there’s more you should know to prevent yourself from becoming a victim this tax season. Read on for the IRS’s four top tax scams targeting people like you, how to prevent them and what to do if you’ve already become a target.
Identity Theft
Identity theft in the tax world is a little bit different than your average card scam, but can be just as frustrating. It happens in a couple ways:
- A thief uses your personal information to file a tax return, and then has your refund sent to him or her.
- Someone uses your Social Security number to get a job, and when the employer sends its withheld taxes to the IRS., the IRS. thinks you have not been claiming all your income on your tax return.
The first clue that this has happened might be when the I.R.S. informs you by letter that two returns have been filed in your name (yet another reason to file early) or that you didn’t claim all the income that you made at a restaurant in Texas—400 miles away from where you live.
Because of the rise in tax identity theft, the I.R.S. has ramped up its effort to combat it, putting in new processes for handling tax returns and new compliance filters to detect fraud, and aggressively investigating identity thieves. It’s also piloting an initiative that requires taxpayers who have already been targeted to go through a supplementary verification process.
Still, identity thieves will continue to find workarounds, so stay vigilant with the following tips:
How to Prevent It
If your wallet is lost or stolen, or you’ve already been affected by other forms of identity theft, contact the I.R.S. Identity Protection Specialized Unit at 1-800-908-4490. Other steps to protect yourself include:
- Not carrying your Social Security card or any document(s) with your SSN on it.
- Only giving your SSN to businesses when required.
- Protecting your financial information.
- Checking your credit report every four months.
- Securing personal information in your home.
- Protecting your personal computers and mobile devices by using firewalls, anti-spam/virus software, updating security patches and changing passwords for internet accounts on a regular basis.
- Not giving personal information over the phone, through the mail or on the internet unless you have initiated the contact or you are sure you know who you are dealing with.
If This Has Happened to You
If you receive a letter from the IRS telling you that you filed two refunds, or that you owe taxes or are due a refund from a year you did not file, respond immediately to the name, address or phone number on the I.R.S. notice. If you suspect the notice is not from the IRS, contact the IRS Identity Protection Specialized Unit, toll-free at 1-800-908-4490. You’ll be asked to file a police report and fill out an identity theft affidavit. From there, the IRS will work with you to resolve the issue.
Phishing
As with other forms of phishing, a would-be scammer will pose as the IRS. and contact you by email or lure you to a fake website, and solicit information they can use to steal your money or refund.
The thing is, the IRS does not initiate contact with taxpayers by email—or text, or any social media—to request personal or financial information. That direct Twitter message from the IRS asking you for your SSN.? Not legitimate.
How to Prevent It
If you receive an email, tweet, Facebook message or any other electronic communication from the IRS or an organization that is closely linked to the IRS, like the Electronic Federal Tax Payment System (EFTPS), don’t give out any personal information. Forward it to phishing@irs.gov.
If This Has Happened to You
If it’s dawned on you that you’ve given your information to a phisher, immediately contact the IRS Identity Protection Specialized Unit at 1-800-908-4490 and file a police report. Then keep a vigilant eye on your credit report and other financials for any suspicious activity.
Return Preparer Fraud
Most return preparers are just there to help you navigate tax season. But a few are there to take your money and run. They’ll take part of your refund, charge inflated fees or promise guaranteed or huge refunds. (Depending on your personal tax situation, this is how much a return should cost.) According to the IRS, federal courts have issued hundreds of injunctions ordering individuals to cease preparing returns, and the Department of Justice has pending complaints against many others.
How to Prevent It
Find a new tax preparer if he or she:
- Does not sign the return or will not include a Preparer Tax identification Number on it.
- Does not give you a copy of your tax return.
- Promises a refund that seems too big to be true.
- Charges a percentage of the refund amount as preparation fee.
- Requires you to split the refund to pay the preparation fee.
- Adds forms to the return you have never filed before and can’t give you a good explanation of what they are.
- Encourages you to place false information on your return, such as false income, expenses or credits.
If This Has Happened to You
Turn ‘em in. Complete the Form 14157, Complaint: Tax Return Preparer and mail it to:
Internal Revenue Service Attn: Return Preparer Office 1122 Town & Country Commons Chesterfield, MO 63017-8200
Free Money!
If, in your church or another public place, you see a flier advertising free money from the IRS and suggesting that you can file a tax return with little or no documentation, rip it down and tear it into little pieces. Also question any friends or family members who unwittingly promote this to you. This is an increasingly common scam that often targets low-income individuals. (There is a way you can get money from the I.R.S., but you won’t find it on a flier.) By the time your return is rejected, the scammer is long gone with your Social Security number and money.
How to Avoid It
Don’t believe anyone who promises you a abnormally large refund, or tells you you can file your return with almost no documentation.
If This Has Happened to You
Contact the IRS. Identity Protection Specialized Unit at 1-800-908-4490. And yes, you’ll still have to file.
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