Tax filing season is in full swing, and this time of year always brings forth an influx of scams that trick unaware filers out of their hard-earned money. Whether they are calling and pretending to be “tax accountants” who can lower the amount of taxes owed or they claim to be an IRS representative and demand money for an “unpaid tax”, these unethical con artists think of countless schemes to steal money from people this time of year. Below is more information about each scam, the red flags to look out for, and how to best defend yourself against each scheme. Remember that you are legally responsible for what’s on your tax return, and if a con artist fools you, it’s you that’s likely to be stuck with the consequences.
1. Phishing
What is it? An email or website disguised as a trustworthy entity that is designed to fool you into downloading malware or giving your information away.
The red flag(s):
• Email requests for money or private/sensitive information, or instructions to open an attachment, often from a fake email address or website.
Protect yourself by… verifying the sender’s email address or website. Be vigilant, as a minor spelling “error” could mean the difference between a legitimate entity or a scammer.
2. Phone Scams
What is it? Phone calls from criminals impersonating the IRS.
The red flag(s):
• Demanding immediate payment of taxes, often in an angry manner.
Protect yourself by… immediately hanging up on anyone that shows these red flags. The IRS will never demand payment over the phone, threaten you, or request payment without first mailing you a bill.
3. Identity Theft
What is it? When someone uses your information without your permission.
The red flag(s):
• Unknown credit card accounts and/or misinformation on your credit report.
• Tax return is denied because a return was already filed.
Protect yourself by… treating personal information like cash (do not leave it lying around).
4. Return Preparer Fraud
What is it? When a tax preparer falsely manipulates the figures on your income tax return to fraudulently obtain tax credits.
The red flag(s):
• Tax preparer boasts that they can get you a larger refund than anyone else.
• Fee is based on your refund.
Protect yourself by… choosing a reputable return preparer. Ask for their IRS Preparer Tax Identification Number (PTIN) and never sign a blank return.
5. Fake Charities
What is it? Scammers posing as a charitable organization to steal money from unsuspecting donators.
The red flag(s):
• They try to get you to donate immediately and don’t provide key details about the organization.
• Refuse to give you proof that a donation is tax deductible.
Protect yourself by… investigating all charities in detail before giving.
6. Inflated Refund Claims
What is it? Tax return preparers promising outlandish refunds.
The red flag(s):
• Requests you to sign a blank return.
• Promises a large return without even looking at your records.
• Basing their fee on your refund.
Protect yourself by… again, choosing a reputable tax preparer. Ensure the preparer signs and includes their PTIN and make sure your return will be submitted electronically.
7. Excessive Claims for Business Credits
What is it? Illegally claiming the fuel tax credit or misuse of the research credit.
The red flag(s):
• Tax preparer entices you to claim these credits to inflate your refund.
Protect yourself by… carefully reviewing the reports by tax preparers to ensure they accurately reflect your activities.
8. Falsely Padding Deductions on Returns
What is it? Falsely inflating deductions or expenses on tax returns. A dishonest tax preparer might do this if they expect a percentage of their fee to come from your refund.
The red flag(s):
• Dishonest reporting of deductions to inflate your refund.
Protect yourself by… making sure you file a 100% accurate return. Using tax software is one recommendation from the IRS to ensure you file an accurate return.
9. Falsifying Income to Claim Credits
What is it? Claiming income that you did not earn to maximize refundable credits.
The red flag(s):
• A tax preparer tries to talk you into claiming false income, often via fake tax forms.
• Use of fake forms. Scamming tax preparers might provide fraudulent Form(s) 1099-MISC or Form 56, Notice Concerning Fiduciary Relationship, “to further perpetrate the scheme.”
Protect yourself by… choosing a tax preparer carefully. Remember that you are legally responsible for what’s on your return even if someone else filed it for you.
10. Abusive Tax Shelters
What is it? A scheme that promises to eliminate your tax bill.
The red flag(s):
• A scammer tries to convince you to put your assets into a trust, LLC, LLP, IBC or foreign financial account.
• Use of official-looking documents to make it seem legal.
Protect yourself by… getting a second opinion from a trusted, independent tax advisor regarding the services you were offered.
11. Frivolous Tax Arguments
What is it? Wild notions of what is legal when it comes to paying taxes. Scam artists will tell taxpayers they don’t owe any income tax by making the following claims.
The red flag(s):
• Suggesting filing a tax return is voluntary, based on religious reasons or others.
Protect yourself by… understanding that these claims are false. The IRS notes that “no one has the right to… disregard their responsibility to pay taxes.”
12. Offshore Tax Avoidance
What is it? Hiding your income in offshore bank accounts.
The red flag(s):
• An organization that promotes the idea of hiding money offshore, usually through seminars or workshops.
Protect yourself by… avoiding these organizations and illegal promoters. Don’t fall for any scheme that pushes you to avoid paying taxes.
Stay vigilant to avoid these scams. Significant fines and possible criminal prosecution are the consequences of falling prey any one of the “Dirty Dozen.” You are responsible for whatever happens.
About Justin Lavelle
Justin Lavelle is the Chief Communications Officer at BeenVerified.com. BeenVerified is the fast, affordable, and easy way to access public records and search for people. Find out ages, marital status, addresses, email addresses, phone numbers, criminal records, and more.