Educate yourself about tax scams
In 1716, playwright Christopher Bullock said, “’Tis impossible to be sure of anything but death and taxes.”
Lately there seems to be one other certainty: Scammers. Whenever there is money or personal information to be gained, the scammers come out in force. And tax returns have plenty of both.
The Internal Revenue Service (IRS) maintains a list of frequently-reported scams. Here are six that affect individual taxpayers.
This is an increasingly common problem. You file your taxes, then you get a letter from the IRS rejecting your return because there was an earlier return submitted under your social security number. Scammers do this to collect a fraudulent refund. In 2015, the IRS initiated 776 identity theft investigations.
If someone files a fraudulent tax return under your social security number, the IRS has a website to help you. Visit identitytheft.gov to learn more.
The IRS will never call you demanding payment. That is the message the IRS wants taxpayers to know. Scammers have threatened innocent taxpayers with arrest, deportation and loss of their driver’s license, among other penalties. Don’t fall for it — just hang up.
“Phishing” is when you receive a phony email that looks legitimate. Like the phone call, the IRS will never ask you to send personal information by email. Never. If you get an official-looking email demanding you send your social security number or credit card number by email, delete it. When in doubt, call the IRS at 800-829-1040 (for individuals) or 800-829-4933 (for businesses).
Return preparer fraud
Your tax preparer receives an enormous amount of personal information from you. It’s not surprising that one way to trick you out of your personal information is to pose as a tax preparer and simply ask unsuspecting taxpayers for their information. Most tax preparers are honest professionals, but if you have to seek out a new tax preparer, try to go with someone you know, get references from family and friends or work with a company that has been in business for many years.
Inflated refund claims
Be wary of any tax preparer or service that promises big refunds before they’ve seen your paperwork, requests to sign a blank return form, or any fees that are based on a percentage of your refund. Often these are based on fictitious social security benefits and false claims for the earned income tax credit and the American Opportunity tax credit. Not only will you have to spend time straightening out this return, you may have to pay a penalty for filing a false return.
Every year dishonest people pose as fake charities to bilk well-intentioned people out of money. Be cautious if you have been contacted by a charity whose name is similar to a nationally-known charity, or if any charity asks for your personal information, such as social security or credit card number. If you didn’t initiate the call, do your research before you hand over your credit card number.
Protect yourself by confirming that you are working with a legitimate charity that is tax exempt. One way to do that is to visit https://apps.irs.gov/app/eos/ and search for the charity you are considering.
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