How to Spot and Avoid Income Tax Scams

Filing your taxes can be stressful on its own, but today it’s more important than ever that you are aware of cybercriminals who prey on unsuspecting taxpayers. These criminals count on you being confused by all of the tax forms coming in the mail, and the amount of information the IRS can request. Cybercriminals use this confusion to try and obtain your personal and financial information. Here are some of the most common tax scams to look out for, along with ways to ensure you don’t become a victim of them:

Phishing

Phishing is a scam using unsolicited email or a fake website, posing as a legitimate website, to trick you into providing personal and financial information. The email or fake website can also be used to infect your device with malware. Cybercriminals use the information collected to commit identity theft or financial theft. Phishing is an effective scam during tax season because many people feel comfortable providing personal information to the IRS.

It is important to keep in mind that the IRS will not initiate contact with taxpayers by email to request personal or financial information. They also won’t send you an email about a bill or refund out of the blue. Don’t click on anything claiming to be from the IRS that takes you by surprise. Official IRS websites have URL addresses beginning with www.irs.gov, so if an IRS site you are looking at has a different address, don’t enter any information, no matter how official it looks. If you receive an unsolicited email that appears to be from the IRS, report it by sending it to phishing@irs.gov.

IRS Impersonation Telephone Scam

Another common scam occurring during tax season involves callers pretending to be IRS agents. These callers try to convince you to pay an outstanding tax debt that doesn’t exist. They can sound very convincing when they call, and may use fake names and IRS identification badge numbers to sound official. They may even threaten you with jail time or garnishment if you do not immediately settle the debt by sending a wire transfer or prepaid debit card. The callers typically alter the caller ID to make it look like the IRS is calling and leave urgent callback requests if the phone is not answered.

The IRS will never call taxpayers demanding payment on the spot, nor will they call about taxes owed without first having mailed you a bill. The IRS will not demand payment without giving you the opportunity to question, or appeal the amount you owe. They will not require you to use a specific payment method for your taxes, such as a prepaid debit card, and will never threaten to bring in law enforcement to have you arrested for not paying. If you receive a call like this, hang up immediately and contact the Treasury Inspector General for Tax Administration at 1-800-366-4484 to report the call.

Return Preparer Fraud

The majority of tax return professionals provide honest, high-quality service, but there are some dishonest preparers out there who prepare tax returns with the intent of committing refund fraud or identity theft. They may use flyers, phone calls and/or emails to lure victims with the promise of larger than normal tax refunds. Once they have your personal information, they may falsify your tax return to obtain a huge refund, which they deposit into their bank account, or use the information on your return to steal your identity. Common victims of this scam are people who are not required to file a tax return, non-English speaking individuals, and the elderly, but anyone is a potential victim.

You should be on the lookout for anyone promising inflated refunds. You should be suspicious of anyone who promises a large refund without looking at your records, asks you to sign a blank return, or charges fees based on the amount of the refund. Reputable tax preparers will not cold call you and promise you a large return without reviewing your records. Before choosing a tax preparer, you should ask for their IRS Preparer Tax Identification Number, or PTIN, and verify it with the Directory of Federal Tax Return Preparers at www.irs.gov.

The Bottom Line. Never respond to unexpected emails or other communications that are supposedly from the IRS. Never provide personal information to someone who calls you out of the blue, even if they claim to be from the IRS. You should only provide personal information to the IRS when you are the one who initiates the call. You should only provide personal information to a licensed tax professional after you have verified them with the IRS. Following the tips mentioned above will help you from becoming a victim of an income tax scam. 

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