Tax season is here, and, unfortunately, a rise in tax scams is likely to come with it. Tax scams can take many different forms, but most tax scams fall under three major categories: fraudulent returns, phone scams, and phishing.
Most do not realize they are a victim until their actual tax return is rejected by the Internal Revenue Service (IRS)—since the IRS only accepts one return per Social Security number. First and foremost, file tax returns as soon as possible. If a Social Security number has become compromised, this will assist in the likelihood that the IRS has accepted a legal return and not that of the scammers.
1. Beware suspicious phone calls and emails
One of the most common tax scams involves fraudsters calling a potential victim claiming to be from the IRS. The caller matter-of-factly demands that the victim pay back taxes that are owed, or law enforcement will arrive shortly to arrest the victim.
Another common scam entails phishing emails, which are designed to get you to reveal personal information about yourself. The IRS has seen an increase of scams involving emails that direct victims to websites with fake log-in pages. Sometimes these emails are designed to look like they are from trusted organizations. Other times, they can even be legitimate email accounts that have been hacked, all to get victims to "provide money, passwords, Social Security numbers and other information that can lead to identity theft."
The good news is that phone scams are easy to avoid if one knows a few simple rules.
The actual IRS will never:
2. Choose a tax preparer carefully
If you are one of the millions of taxpayers who will pay someone else to help you prepare your taxes this year, make sure to do your homework first. Two of the scams that make the "Dirty Dozen" list involve hiring unscrupulous accountants or tax preparers. While most tax preparers are honest professionals, there is a definite subset who will falsely advertise or promise impossibly high returns if you use them. Unfortunately, the victims find out too late that the person they hired took off with all or a high percentage of their refund as "fees" for their services, or used false information to fill out the return.
To avoid this type of scam, you need to make sure you hire a competent tax preparer. You can do this largely by following the same practices you would follow for hiring other professionals:
Check their credentials and qualifications. You might want to prioritize the tax preparers that are certified public accountants, attorneys, or enrolled agents with the IRS. The IRS provides an online directory where you can search for preparers with different qualifications near you.
Read online reviews of their services. If you can't find online reviews for a specific preparer, that should be considered a red flag.
Check the person or organization through the Better Business Bureau.
Always review your tax return before it is filed. If you have any questions or something doesn't seem right, ask about it. Never sign a blank return.
Ask about fees upfront. The IRS unequivocally states, "Avoid preparers who base fees on a percentage of their client's refund or boast bigger refunds than their competition."
Finally, you can always request to see a preparer's IRS-issued PTIN -- the Preparer's Tax Identification Number. All paid preparers are required to register with the IRS and receive this number.
3. Be honest
Sadly, several of the points on the "Dirty Dozen" list are warnings to consumers to not file false returns. This can range from falsely padding business expenses to claiming extra dependents, but regardless of the specifics, the reward is never worth the risk it entails.
4. Be Organized and File Early
The earlier you file your taxes, the sooner you will get any refunds owed. Doing so will also make it much more difficult for tax scammers to beat you to the punch. Once you’ve received your tax refund, it will be much more difficult for criminals to steal, at least via the IRS.
5. Be Diligent with Your Passwords
Yes, remembering all those passwords is a big pain. But, don’t try to make it easier on yourself by using the same password for multiple websites. I’m talking to you Mr. Password and Ms. Password123! Try to use long phrases that will make it hard for a hacker to break. Your name, birthday or even those of your kids are not great passwords either. Consider mixing up letters, numbers, upper and lower case letters and symbols.
6. Update Your Cybersecurity Regularly
It may feel like you are constantly updating your software, but you are probably not doing it enough. My computer guy just told me my computer was a mess. That was a day after I thought I had updated everything.
At the same time, be cautious when and where you post personal information. Be aware of things like place of birth, date of birth and pets’ names on sites that can be viewed by anyone. Obviously, don’t reference your Social Security number on Facebook.
Invest in a shredder, and shred all paperwork that contains your personal information. Don’t login into bank or investment accounts on unsecured Wi-Fi networks. Do not prepare and file your tax returns on a public computer. Lastly, back up your computer on a regular basis, ideally to the cloud or another backup that is kept offsite.
If you think you are the victim of Tax Fraud Report It ASAP
If you think you may be a victim of tax fraud or scam, the IRS has laid out all the steps to tax on its official site, IRS.GOV. There are additional agencies that should be notified as well. That includes your state tax authority. If scammers have your information and have filed a fraudulent federal tax return, they will also likely file a fraudulent state return.
Cleaning up these tax disasters can easily take 180 days to resolve, not to mention hours and hours of calls and conversations with the IRS. The 180-day estimate assumes the IRS is at full staffing levels. It could be much longer this year. Tax fraud is complicated and stressful to clear up. If you become the victim of one of these scams, consider obtaining professional guidance from a certified public accountant (CPA) or enrolled agent (EA) to help clear up the issue.
Flynn Financial Group Inc