Every year, the Internal Revenue Service (IRS) issues reminders to avoid tax season scams. And every year, the masterminds behind these scams continue to defraud honest taxpayers with convincing frauds that mimic authentic options for filing and paying taxes or receiving tax refunds.
In this article, learn about some of the most prevalent tax season scams for this year and how to spot the signs so you don’t get scammed.
Scam 1: The scary IRS phone call scam.
While just a handful (between 0.50 and 0.86 percent) of tax returns trigger IRS audits annually, knowing this doesn’t seem to lessen our fear of being audited. In fact, some people are so afraid of the IRS they actually don’t file their taxes at all in the hopes of going unnoticed (note to the reader: this is not a good strategy since the IRS usually notices!).
Scammers take full advantage of this well-documented fear of the IRS with their “scary IRS phone call” scam.
In this scam, the scammer phones you and pretends to be someone from the IRS. They then proceed to inform you that you owe lots of money and that if you don’t pay you may (fill in your worst fear here). For some people, that worst fear is getting deported or sued and for others it is going to jail or getting their drivers license revoked or getting fined for every cent in their bank account.
The scammers will often follow up this phone call with a second call from a fake police officer who threatens to do whatever the scammer just told you would be done if you didn’t pay up. The IRS states that if you get a phone call like this, just hang up. No one from the IRS will ever call you in this manner and threaten you over the phone.
Scam 2: The fake tax preparer scam.
The IRS officially calls this scam “Return Preparer Fraud,” but really it is just a scam artist hanging out a fake shingle and saying they are qualified to do taxes when they aren’t.
Of course, most people who get caught up in this scam don’t stop long enough to check credentials in their headlong dash towards the speedy, low-cost tax prep and huge, fast refund that is being dangled in front of them.
But if you don’t do your due diligence in advance, it is the fake tax preparer who wins as they walk away with your refund and often, some fat fees along with that. Sometimes the result is even worse, since you have likely handed over all of your personal and financial data plus your social security number to the scammer, who can then turn around and use it for identity theft purposes.
Luckily, there are some ways to verify if the tax preparer is who they say they are. The IRS provides a database you can use to be sure the tax preparer you select is qualified to do your taxes.
Scam 3: The phishing scam.
“Phishing” is a funny word to wrap your head around. But really, you could just translate it in your mind to mean “fishing,” as in “fishing for information,” and you would have the perfect understanding of the scammers’ intent.
Phishing scams are designed to facilitate identity theft. The scammers’ goal is to send you an official-looking email or website link that prompts you to input sensitive personal or financial data.
The really terrifying phishing scams send you an “official” IRS email stating you made mistakes on your taxes or didn’t get the full refund you are entitled to. Not surprisingly, these scams work pretty well because
a) you don’t want any more interaction with the IRS than is absolutely necessary, and
b) you want every cent of the refund money you are entitled to receive.
The only real defense you have against phishing scams at tax time is to double-check the authenticity of the email or link you receive.
Scam 4: The high fees in exchange for fast refunds scam.
Finally, this scam banks on your need to get your hands on any IRS refund money fast. Yes, you may pay a bit (or a lot) extra to get your refund expedited, but it sure will be worth it when you have your refund in hand while everyone else is still waiting for a check in the mail.
Unfortunately, most of the time you won’t see a dime of your refund, or if you do you will have paid out as much as 10 percent of it in fees before it arrives. Sometimes the scammer will also offer you a “refund anticipation loan.” Here, beware if any so-called tax “professional” offers to give you early access to your refund in exchange for paying them an upfront fee!
Worst case scenario, if you elect to receive a refund check in the mail you may end up waiting a few weeks. This is still far cheaper in the long run than letting a scammer get their hands on your money and personal information.
These four scams represent some of the most all-time successful and prevalent tax time scams going on today. But they certainly do not represent all possible tax time scams you may encounter.
So just stay vigilant and be sure to contact the IRS or your state certified public accountant association to verify whether the individual or information is worth your time, your funds and your trust.