Right now, the time is ripe for scammers. Since the filing deadline has just passed, many people are anxiously waiting for their refunds to hit their accounts. Unfortunately, scammers take this window of opportunity to exploit unsuspecting taxpayers. When it comes to protecting yourself against these crooks, knowledge is your most powerful tool. Learning how to identify and avoid these common tax scams could prevent you from becoming their next victim.
7 of the Most Common Tax Scams
The reality is that scammers work year-round. However, they tend to become more active around tax season. If you want to steer clear of these predators, here are 7 of the most common tax scams you should watch out for.
1. Impersonating the IRS
One of the most common and believable scams is when someone reaches out to you as a representative of the IRS. The first time it happened, I almost fell for it myself.
With this scam, someone calls you claiming to work for the IRS. In my case, they said they were with the Taxpayer Advocate Service, which is a real department within the IRS. She went on to tell me that there was a mistake on my tax return and that I owed more money. Then, she requested an immediate payment to prevent penalty fees and legal action.
Although it seemed possible at first, there were a few red flags that I found suspicious. First, the IRS usually initiates contact by mail before they ever call. Second, the IRS never uses email, SMS, or social media to discuss your tax issues. And third, when I logged into the IRS website, there was no information to corroborate the claim. By stopping to ask myself a few questions before panicking, I was able to recognize the scam for what it was.
2. The Promise of a Bigger Return
Sometimes scammers will take the opposite approach. Instead of telling you that you owe, they send a notification that you overpaid and are due a bigger return. These will usually come as phishing emails that include a form you must complete to receive your payment. Instead, they use it to steal your information.
Although an email may look official and have the correct logos, you can easily spot a fake. Always check the email address and verify it against the company’s official address. If it doesn’t include the company name or has a random combination of letters and numbers, it’s a scam.
3. Threat of Penalty
Besides impersonating the IRS, some scammers will also pretend to be from other agencies or law enforcement. They will claim that they are trying to contact you about improper filing, potential misconduct, or tax evasion.
These calls usually leave a voicemail that will threaten you with some type of penalty for not returning their call to provide information or make a payment. These penalties could include fines, revoking your driver’s license, enacting a property lien, voiding your Social Security Number, arrest, and other legal actions.
You can usually tell these are fake calls when they are pre-recorded messages. And, most of the actions they are threatening simply aren’t plausible. However, you can log into your account or check with your tax preparer if you have any doubts about the validity of their claim.
4. Suspicion of Fraud
Another one of the most common tax scams that fools many people is when someone contacts you about suspicion of fraud. These calls will come from a legitimate-looking phone number to alert you of suspicious activity with your Social Security number.
While there are different variations, it starts when someone calls to inform you that your information has been compromised. They may either be following up about a second person filing with your information or offering services to secure your information. Either way, they are phishing to get your personal information.
In situations like this, it’s best to remind yourself to never give out your personal information over the phone. Unless you initiated the conversation, it is most likely a scam. However, if you think you might be at risk, you can request an Identity Protection PIN (IP PIN) from the IRS for an extra level of verification.
5. Ghost Tax Preparers
Fraudulent tax preparation is one of the more common scams in the months leading up to April 15. With this one, the scammer will pose as a tax preparer you hire to file your taxes for you. They will complete your return and charge their fees, but never sign with their Preparer’s Tax Identification Number (PTIN).
It’s important to know that it is illegal for them not to include it on your return. When this happens, they will usually redirect your refund to another account. Therefore, you should always make sure to check their professional reputation and credentials before paying for their services. If they refuse to provide the information or demand cash up front, then you are likely being set up.
6. Relief Payments
Scammers and con artists have no qualms about preying on the vulnerable, including those seeking federal relief payments. They will often misrepresent themselves as an agent of a federal agency with the promise of financial relief only to steal your money, information, and identity.
After a natural disaster, many successfully steal from the victims by reaching out with the offer of financial assistance. Others pose as charitable organizations seeking donations for relief efforts. Covid-19 also presented new opportunities for scammers through fake stimulus checks. The fact that this scam is so adaptable is what makes it difficult to recognize. But if you know what to look for, the signs will always be there.
7. Links to Track Your Refund
This last one has become much more prevalent in recent years. Although scammers have long used phishing emails, they are now using SMS as well. With this scam, you receive a link in a text message to track your refund. And if you’re waiting on your money, it’s easy to fall for.
However, you have to remember that the IRS will never communicate with you this way. If you want to know the status of your refund, go to the IRS website to use the Where’s My Refund tool.
Tips to Avoid Becoming a Victim
Unfortunately, tax scams don’t seem to be disappearing. Instead, they are evolving and adapting to modern technology. Therefore, it is even more important for you to stay alert and informed. Teach yourself about the most common scams and take precautions to protect yourself.
If you are on the receiving end of one of these scams, report it right away through the IRS website or by calling 800-366-4484. If you can recognize these common tax scams, you may be able to prevent someone else from becoming their next victim.
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Jenny Smedra is an avid world traveler, ESL teacher, former archaeologist, and freelance writer. Choosing a life abroad had strengthened her commitment to finding ways to bring people together across language and cultural barriers. While most of her time is dedicated to either working with children, she also enjoys good friends, good food, and new adventures.
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