Tax season is upon us again, and with it comes a flock of scammers. Thousands of people fall victim to tax scams each year, costing them millions of dollars and leaving their personal information compromised.
Fraudsters are always coming up with new ways to make a buck, and they sure are creative. Here are five tax scams to avoid this filing season.
1. Canceled social security numbers. One scam going around is a scare campaign that uses robocalls to contact taxpayers saying their Social Security number will be canceled or suspended due to criminal activity or fraud. They prompt the recipient to call a number to clear the matter, and upon calling the victim is asked for sensitive personal information. According to the Federal Trade Commission (FTC), social security numbers don’t get suspended. Ever. Also, the IRS doesn’t contact people about sensitive information via phone calls.
2. IRS email impersonation. This national scam campaign involves IRS impostors sending unsolicited emails to taxpayers with subject lines such as “Electronic Tax Return Reminder” or “Automatic Income Tax Reminder.” The emails contain links to websites that pose as IRS.gov and have details appearing to be about the taxpayer’s account, refund or electronic return. They also include a “temporary password” to “access” the files needed to submit the refund—files that turn out to be malicious. The impostor can then attain control of the victim’s computer or download tracking software to get passwords to sensitive accounts.
Important note: The IRS does not contact taxpayers by email, text messaging or social media platforms to request financial or personal information. The only way the IRS will contact you to request personal or financial information is in person or by standard mail.
3. The Bureau of Tax Enforcement. Scammers are mailing taxpayers letters threatening an IRS levy or lien based on overdue taxes owed to the Bureau of Tax Enforcement. These letters tend to look very legitimate, and the IRS does reach out to taxpayers via snail mail.
The only problem? The Bureau of Tax Enforcement doesn’t exist. An official IRS letter will always have a seal and a notice or letter number. If you’re unsure whether a letter is official, call the IRS directly. If the letter is fake, the phone number listed on it will likely connect you to the one committing the fraud.
4. Ghost tax preparers. Ghost tax preparers accept money to prepare your taxes but don’t sign the return, leaving you personally responsible for any errors. They’ll often claim fake deductions or invent income to qualify for tax credits and get you the biggest refund possible. Promising such a large return gives the preparer leverage to increase their fees or take a nice percentage of your inflated refund. If you get audited, you’ll be the one liable for tax fraud and face some hefty charges, while the ghost preparer gets off scot-free.
Anyone who prepares tax returns must legally have a valid Preparer Tax Identification Number (PTIN). They’re required to include this PTIN and their signature on all completed tax returns. Make sure your tax preparer has a PTIN and review your return carefully before signing.
5. Fake charities. Donating to your favorite charities can feel like a win-win situation: you’re funding a good cause and receiving a tax benefit. But not all non-profits, charities and foundations are legitimate. Scam artists set up fake charities to lure people into making donations and providing sensitive personal information. Victims who try to claim a deduction made to a phony charity could get audited and face penalties.
Do some research before donating. The IRS website has a Tax Exempt Organization list you can use to ensure you are contributing to a legitimate charitable cause.
Scammers continue to get more sophisticated with their approaches. While some scams are blatant, others are not so easy to spot. If you suspect tax fraud activity, report it to the IRS immediately. Arm yourself with knowledge and avoid falling victim to tax scams this season.