With tax season officially upon us, many taxpayers are in the process of preparing (or at least thinking about preparing) their tax returns. However, the Internal Revenue Service (IRS) recently issued a warning to taxpayers about some common tax scams that have already claimed a number of victims. By being aware of these scams and what to watch out for, taxpayers and tax preparers can reduce their risk of becoming another statistic while keeping their hard-earned money safe.
Phishing Scams
Phishing schemes remain among the most common avenues through which scammers gain unauthorized access to taxpayers' personal information. Most of the time, phishing messages will come in the form of an email or text message, with scammers pretending to be from the IRS. These scammers may “notify” their victims that their refunds have been put on hold due to unusual activity, prompting taxpayers to provide personal information (such as Social Security numbers) to verify their accounts. Once they have the information, scammers may use it to steal their victims' identities or commit tax fraud.
Bogus Charities
Another potential tax scam to watch out for is that of fake charities. Around tax time, many taxpayers make charitable contributions in an effort to reduce their taxable income. Unfortunately, scammers will try to take advantage of this by setting up fake charitable organizations to steal donations or even plunder personal information. Remember when donating to charity prior to tax time (or any time of the year) that your donations are only tax-deductible if they are made to a qualified tax-exempt organization.
False Information
Social media has also made it easy for scammers to spread dangerous misinformation when it comes to taxes. If you spend time on social media, it's always a good idea to fact-check information and “tips” you read about tax returns and tax preparation. All too often, false information will spread about fake credits, deductions, and other tax benefits that simply do not exist or that could get you into trouble. For example, there's a post that often floats around on social media about a “self-employment tax credit” that simply does not exist. Scammers may offer to “help” taxpayers claim the credit in an effort to steal their personal information, so be wary of anything you read on sites like Facebook or Instagram.
Ghost Preparers
Another thing to watch out for this tax season—especially if you hire somebody else to prepare your return—is so-called “ghost preparers.” These are tax “professionals” who will collect money to prepare a tax return but will refuse to sign it or offer any kind of guarantee on their accuracy. Often times, these scammers will also attempt to charge a fee that is based on the total amount of your refund. If you're working with somebody who checks off any of these boxes, you could be dealing with a scammer.
Reverse Tax Scams
Most of the time, tax scams target individual taxpayers—but in recent years, there have also been more instances of scammers targeting tax professionals. When this occurs, scammers actually pose as new clients looking for help with tax preparation or related services. From there, they will begin communicating with their intended victims via email, eventually sending over a malicious link or file. Because the tax professional believes they are working with a genuine new client, they may click on the link or open the file without giving much thought.
From there, the malicious file or link can result in stolen personal information that the scammer can then use to file fraudulent returns, steal identities or commit other crimes. Because of the uptick in these kinds of scams, tax professionals need to be especially careful when it comes to opening any links or downloading any files from others during tax season.
Stay Alert This Tax Season
Unfortunately, scammers seem to come out of the woodwork with each new tax season that arrives. Ultimately, these scammers are preying on unsuspecting taxpayers who are quick to give up their personal information, often in an attempt to steal part or all of their refunds. The good news? By knowing which scams to watch out for, you can avoid some serious headaches come tax time.
And remember, if you're ever in doubt as to whether you've been approached by a scammer, you can always report suspected scams or abuse to the IRS directly.
If you have any questions or would like additional information, please contact our tax professionals.