The IRS recently released its annual list of the top tax scams impacting not only individual taxpayers, but tax preparers, and company payroll departments as well. Here is the list (in order of most prevalent) of what they are, and what you can do to help prevent these from happening to you:
- Phishing schemes – fake emails or websites designed to trick you into revealing personal information (such as Social Security, credit card, or bank account numbers) or your login or password information. Remember, the IRS never sends out e-mails asking for this information, and your bank shouldn’t either. If you don’t recognize who an e-mail is from, either delete it, or be very wary about clicking on any attachments/links in those emails.
- Phone scams – calls or messages from criminals impersonating IRS agents that threaten police arrest, deportation, license revocation, etc. if you don’t comply with handing over confidential information. This activity increases during tax season, when taxpayers are most vulnerable. Note: the IRS usually initiates contact with taxpayers by mail (not by phone), and does not make these kinds of threats when attempting to collect taxes, so verify the legitimacy of any phone message by offering to call them back, and contact the IRS directly (see # below) before taking action.
- Identity theft – happens when scammers file tax returns pretending to be you, or steal personal and financial data from you or your tax preparer. Shred your personal data after use, get a P.O. box for receiving important mail, never put confidential outgoing mail in a neighborhood mailbox, and confirm with your tax preparer how they safeguard your information.
- Return preparer fraud – phony tax return preparers, trying to perpetrate refund fraud and identity theft. Be wary of preparers who guarantee large refunds, and make sure you never sign a blank tax return. The IRS website has a list of tips to follow when choosing a tax preparer (https://www.irs.gov/uac/ten-irs-tips-to-help-you-choose-a-tax-preparer) if you don’t have a good local resource for finding one.
- Fake charities – scams to steal money and personal information from unsuspecting (but charitable) taxpayers. Often the names used are similar to well-known charities, or their websites look like legitimate charities. Before you donate to a charity you don’t know well, check out Exempt Organization Select Check on the IRS website (https://www.irs.gov/charities-non-profits/exempt-organizations-select-check) to make sure they are legitimate.
- Falsely inflating refund claims - criminals posing as tax preparers who contact elderly or low-income taxpayers that don’t normally file tax returns and offer to file tax returns for them, claiming inflated refunds (and then stealing them). Scam artists also file returns claiming phony earned income tax credits (EITCs), education credits or inflated deductions - to get larger refunds that they can steal. If you haven’t filed a tax return - or filed for these kinds of credits/deductions in recent years - you may want to call the IRS helpline (800-829-1040) before signing your return.
Each and every taxpayer has a fundamental set of rights available to them when dealing with the IRS. These are known as the “Taxpayer Bill of Rights.” While it’s good to familiarize yourself with these rights (and the IRS’s obligations to protect them), it’s also important to realize that every taxpayer is ultimately responsible for the contents of his or her own tax return, so be mindful of the steps you need to take to protect yourself this tax season - and throughout the year.
Securities are offered through LPL Financial, Member FINRA/SIPC. This information is not intended to be a substitute for specific, individualized tax, legal or investment planning advice.