Anyone with a phone or an email address knows financial scammers are relentless — and tax season is perhaps the worst time of year for scams, as millions of Americans anxiously gather their most private financial information to send to the IRS.
More than 1 in 3 U.S. adults (34 percent) have experienced a financial scam or fraud in the past year, and 37 percent of those victims have lost money as a result, according to Bankrate’s Financial Fraud Survey.
The IRS says it’s smart to be nervous, especially this time of year. While most tax scams occur year-round, they typically peak during tax season.
“Scammers are relentless, and they use the guise of tax season to try tricking taxpayers into falling into a variety of traps. These red flags can lead to everything from identity theft to being misled into claiming tax credits for which they’re not entitled,” said Terry Lemons, IRS communications senior adviser, in a press release announcing the IRS’ annual Dirty Dozen tax scams.
Here are five tax scams to watch out for, and tips to avoid them.
1. Suspicious email or text messages
Phishing is alive and well, unfortunately, and the IRS says these these types of scams continue to grow, particularly those in which fraudsters send messages that claim to be from the IRS.
Taxpayers are typically enticed to click on links to “verify their refunds” or they receive false threats of impending criminal prosecution for tax debt.
Phishing messages can be sent as emails or texts asking taxpayers for personal information that could lead to identity theft. IRS warns taxpayers and tax professionals to be on the lookout for fake communications that look like they come from state tax agencies, tax software companies or the IRS itself.
These days, scammers are even using artificial intelligence to target their victims. With the help of AI, scammers create messages containing taxpayer information, such as names and addresses. The information is then used to create fake IRS correspondence that is becoming increasingly difficult to differentiate from the real thing.
The IRS is clear that it “doesn’t initiate contact with taxpayers by email, text messages or social media channels to request personal or financial information.” See the IRS warning on scammers posing as the IRS.
“When you don’t recognize the sender,” says Tomika Bullet, tax principal at Windham Brannon in Atlanta, “ask yourself, does the email address look like a legitimate business email address? When in doubt, delete the email if the user is suspicious or unfamiliar.”
Don’t click on emails or text messages that appear to be from the IRS: They might contain malware. In such cases, hackers could install ransomware on your computer and prevent you from accessing your files or systems. Remember, the IRS won’t initiate contact with you via email or text.
2. Bad tax advice on social media
Misleading tax advice on social media has become such a problem that the IRS now counts it as one of its Dirty Dozen scams. TikTok and other platforms are rife with tax influencers urging people to take questionable steps, such as misusing tax documents to report incorrect tax credits.
One common scam, according to the IRS, is to suggest you fill out your W-2 or other tax forms with inflated withholding amounts, so you can claim a large tax refund.
Taxpayers face penalties and, potentially, criminal charges if they claim fraudulent tax credits or other tax benefits. Even if a social influencer isn’t promoting a scam, they may not have tax expertise, and that bad tax advice may cost you in interest and penalties.
“Everyone with a social media following doesn’t have the proper knowledge or experience to provide technical guidance,” Bullet says. “IRS procedures and guidance are written and documented. If you can’t find the same guidance from the IRS or other technical sources, one should be very skeptical incorporating the advice for their specific tax matter.”
3. Fake phone calls
Scammers who call you will employ various tactics, including pitching fake tech support or made-up grants. Or they may threaten you with jail time due to unpaid taxes. Another scam: Callers try to sell you a “zero tax” program, in which they promise to eradicate your tax debt. Usually these callers ask for personal information, including your Social Security number.
“The IRS will always contact taxpayers in writing,” Bullet says. “Telephone contact should be disregarded and taxpayers should wait to receive an official written notice from the IRS.”
If you receive one of these scam phone calls, block the caller immediately and report the incident to the U.S. Treasury Inspector General for Tax Administration. Also, consider checking your online IRS account for the actual amount you owe if you receive a suspicious phone call.
4. ‘Ghost’ tax preparers
The IRS also warns about tax preparers who don’t have your best interests in mind. Instead, they aim to defraud you and then disappear. A key warning sign? The cost of the tax-prep service is tied to your tax refund amount.
Another red flag: The tax preparer refuses to sign your tax return. Don’t ever sign an unfinished tax return, the IRS says.
Here are 5 tips to find the best tax preparer for you.
5. Charity scams
Charity scams tends to spike after natural disasters. The IRS warns taxpayers not to fall victim to scams designed to take advantage of people’s generosity through fake charity websites. These websites aim to steal your money and, potentially, your identity.
Make sure you’re using an organization’s official website before giving money. Also, make sure that the charity is legitimate by searching for its name on the IRS’ Tax Exempt Organization tool.
Taxpayers who itemize their deductions on their tax return can claim a tax deduction for charitable contributions they make to legitimate charity organizations.
Bottom line
Americans are becoming more alert and taking measures to protect themselves from scams. According to Bankrate’s Financial Fraud Survey, 89 percent of Americans have taken at least one step over the past 12 months that could protect them from financial scams or fraud in the future, including avoiding clicking on suspicious links or emails (69 percent) and setting up spam filters on their phone, text messages or email (34 percent).
Experts recommend taxpayers remain vigilant not only during tax season, but all year long. A tax scam can take any form, from sophisticated tax-avoidance schemes to phishing attempts to steal your personal information.
The IRS has a page on how to report phishing scams. If you suspect you’re a victim of an improper or abusive tax scheme, you can file a report by mail or fax using Form 14242, Report Suspected Abusive Tax Promotions or Preparers.
Read the full article here
