Tax scams are one of those misfortunes that most people believe they’ll never have to deal with. Unfortunately, these scams are far more common than you might think, and they can affect many aspects of your life, such as your bank account, your credit score, and even your personal property and business assets — among several others.
Every year, the IRS releases a list of the 12 most common current tax scams, which they refer to as “The Dirty Dozen.” In this article, we’ll review the top five scams on their list for 2018, explain how they work, and provide helpful tips to keep you, your family, and your business safe and secure.
The Most Common Tax Scams
Most people are familiar with this type of scheme, even if they’ve never heard the term or associated it with a scam. Phishing is an attempt to collect private, personal, or otherwise sensitive information via fraudulent emails or web forms. Businesses, individuals, and tax preparers need to be wary of phishing, as it’s one of the most common forms of identity theft.
Recently, the IRS highlighted a new twist to the scam in which criminals steal taxpayer data from tax preparation software, file fraudulent returns for those taxpayers, have the refunds deposited into the taxpayers’ actual bank accounts, and then attempt to steal the refunds by posing as representatives for the IRS or a collection agency.
To avoid this scam, verify all your email contacts and remember that the IRS rarely (if ever) contacts taxpayers by phone or email. In fact, the IRS states on its website that its employees “will never initiate contact with taxpayers via email about a bill or tax refund.”
2. Phone Scams
A perennial presence on the IRS’ Dirty Dozen list, phone scams remain one of the more common tax fraud schemes each year. In many cases, con artists posing as IRS agents make unsolicited phone calls to taxpayers and threaten them with arrest, license revocation, and (increasingly) deportation unless they agree to pay a fraudulent tax bill, usually by prepaid debit card or wire transfer.
Remember, the IRS will almost never contact you by phone or email to threaten or demand payment, and you should always verify your email contacts or websites to ensure your personal information is safe and secure. If you receive an unsolicited call from someone who claims to represent the IRS and makes threatening statements while demanding payment, you should immediately hang up and report the matter to the Federal Trade Commission.
3. Identity Theft
We recently wrote a blog article dedicated entirely to identity theft and tax fraud. Although the rates of tax fraud and identity theft have declined in recent years, they remain prevalent enough that we thought it was important to touch on them again here.
Most tax-related identity theft schemes involve criminals using phishing tactics to steal private information such as Social Security numbers and individual taxpayer identification numbers. Once scammers have this information, they can file fraudulent returns and may either get the refunds directly or route the refunds to be deposited.
In recent years, the IRS has held an annual event called the Security Summit to raise awareness about identity theft, develop education initiatives for the public, and help minimize tax scams. Their efforts appear to be working: since 2015, the annual number of identity theft victims has dropped by an impressive 65%. However, taxpayers must remain vigilant about identity security for this encouraging trend to continue.
4. Return Preparer Fraud
Unfortunately, some of the people perpetrating tax fraud are the very tax preparers that Americans trust with their sensitive information. More than half of U.S. taxpayers hire a third-party preparer to handle their taxes, and most of these professionals do excellent, ethical work. Sadly, a small minority of bad-seed tax preparers are always out there waiting to prey on taxpayers who don’t know better.
To avoid questionable shady tax preparers or those who aren’t in good standing, taxpayers should research and vet potential preparers and investigate their reputation by contacting former clients and the Better Business Bureau. Before you work with a tax preparer, you should ask them for their credentials and check to make sure they’re listed in the IRS’ directory of federal tax return preparers with credentials and select qualifications.
5. Fake Charities
Perhaps the most disturbing entry on this year’s list, fake or unqualified charities pop up every day requesting donations and assuring taxpayers that they will receive eligibility for tax deductions in return. These fake groups count on donors not doing their research, and they often succeed.
Unqualified charities are especially prevalent in the wake of national disasters and controversial political decisions. To avoid getting scammed, make sure you only give donations to verified charities that have an established track record of using money wisely. To check whether a charity is legitimate, you can use websites like Charity Navigator, Charity Watch and GuideStar.
Contact S.H. Block Tax Services for Help With All Your Tax Needs
Whether you’ve been a victim of one of the scams listed above or you need help resolving a different type of tax issue, S.H. Block Tax Services is here to help. Our attorneys and support staff have decades of experience helping taxpayers get into compliance with the IRS and the State of Maryland, and we would love the chance to do the same for you. We offer free, no-obligation consultations over the phone and in person, and we have earned an A+ rating with the Better Business Bureau.
The content provided here is for informational purposes only and should not be construed as legal advice on any subject. Please read our full disclaimer here.