About once a week, I get a call from a man that claims to be a representative of the IRS. Every time, he tells me I owe thousands in unpaid taxes, and if I don’t make a payment right away, the sheriff will arrest me and go to jail. He’s aggressive and frightening, but he doesn’t work for the IRS at all; he’s a scammer. And while I know he’s a fraud, millions of others believe people like him and hand over their personal information and even their credit card numbers.
Every year, thieves and scammers come up with new ways to take advantage of people during tax time to steal their refunds or identity. The pervasive use of technology in our lives leaves all consumers open to the potential for identity theft and hacking. However, there are some steps you can take to protect yourself.
As tax season quickly approaches, here are some of the most common tax scams and how to spot the warning signs early.
It’s a common scenario. You receive an email that looks like it’s from the IRS. It tells you that you need to pay more money or that your information has been compromised and it asks you to enter your information through a provided link.
More often than not, those emails are from scam artists who create fake websites and send out emails to trick you into handing over your account information. Then, they use that information to submit a tax return in your name and collect your refund.
Phishing emails are often poor quality and vague and sent from domain names that are intentionally misleading. It is important not to trust the domain sender as it appears in your inbox. Phishing emails will often have spelling or grammatical errors, but scammers are becoming increasingly sophisticated.
Remember, the IRS has never and will never contact taxpayers over email about a refund or tax bill — they only send notifications through the mail.
2. Return Preparer Fraud
If you decide to have someone prepare your tax return for you, keep in mind that you are responsible for any and all information submitted to the IRS — not the preparer. Most tax preparers are honest and high quality, but every year some preparers set out to take advantage of taxpayers by perpetrating tax fraud, stealing their identity or farming their personal information for personal gain.
Tax preparers who pop up every tax season to take advantage of taxpayers cause great harm and pain to their victims, and it is completely avoidable with a little research.
When selecting a tax return preparer, verify their services with past recommendations from sources you trust. Remember — if it seems too good to be true, it probably is. The IRS recommends taxpayers to avoid preparers who claim they can obtain refunds that exceed those of other preparers and those who base their fee off of the amount their clients receive on their refund. These incentivize scammers to lie in the hopes that they won’t get caught, but leave you on the hook when they do.
3. Phone Scams
My weekly caller isn’t the only phone scammer out there; there’s millions in operation. You might receive cold calls from people claiming to be from the IRS or your bank. They’ll ask for personal information or demand you make a payment. They may even threaten you or yell at you.
If someone calls claiming to represent the government or the IRS, do not give them any personal information. Just hang up when they call; if the IRS needs something from you, they’ll send you a letter in the mail.
4. Same Day Refunds
Every tax season, tax preparation businesses pop up everywhere. Filling up vacant strip malls, they offer quick tax filing and same day refunds. But, what they don’t tell you is that they take a significant portion of your refund for the service. Some companies will take as much as 25 percent of your refund.
Instead, look for well-known companies that charge a flat fee and that are available year-round if any issues arise.
What Can You Do?
If you your information has been compromised, immediately contact the fraud alert department of a one or all of the three credit reporting agencies to put a freeze on your account:
Equifax Fraud Department
Experian Fraud Department
TransUnion Fraud Department
Editorial Disclaimer: Information in these articles is brought to you by CreditSoup. Banks, issuers, and credit card companies mentioned in the articles do not endorse or guarantee, and are not responsible for, the contents of the articles. The information is accurate to the best of our knowledge when posted; however, all credit card information is presented without warranty. Please check the issuer’s website for the most current information.