As tax season rolls around, everyone is busy gathering financial documents, crunching numbers, and preparing to file their taxes. Unfortunately, amidst the legitimate tax-related activities, there is a darker side to this time of the year – scams.
Scammers are always looking for new ways to exploit unsuspecting taxpayers, making it crucial to stay informed and vigilant. According to ABC News, “In fiscal year 2023, the [IRS Criminal Investigation] agency initiated 1,409 tax crime investigations and identified $5.5 billion in tax fraud…. Six hundred fifty-five defendants were sentenced for tax crimes during the last fiscal year.”
With that in mind, let’s look at the top 5 scams taxpayers might fall victim to:
1. Phishing Scams
Phishing scams are a pervasive threat during tax season. Scammers often pose as government officials or tax agencies, sending emails or messages claiming issues with your tax return. These messages may contain urgent language, threatening legal action or claiming that you are owed a substantial refund.
To avoid falling prey to phishing scams, remember that legitimate government agencies do not initiate contact through email or phone for personal information. Always verify the source by directly contacting the official agency using a trusted phone number or email.
2. Identity Theft
Tax-related identity theft involves criminals using stolen personal information to file fraudulent tax returns and claim refunds. Victims often remain unaware until they attempt to file their legitimate return, only to discover that one has already been filed using their identity.
Safeguard your personal information by regularly monitoring your financial accounts, using strong, unique passwords, and employing two-factor authentication when possible.
3. Fake Charities
Scammers take advantage of the charitable spirit during tax season by creating fake charities and soliciting donations. To avoid contributing to fraudulent organizations, research charities before donating and ensure they are registered with the appropriate authorities. Be cautious of unsolicited emails, calls, or social media messages requesting donations, and always verify the legitimacy of the charity before making any contributions.
4. Tax Preparer Fraud
While most tax preparers are reputable professionals, some unscrupulous individuals may engage in fraudulent activities. Be wary of tax preparers who promise unusually high refunds, charge exorbitant fees, or refuse to sign the return. Choose a qualified and licensed tax professional with a good reputation, and ensure they provide a clear fee structure before proceeding with their services.
5. Ghost Tax Preparers
Ghost tax preparers are individuals who do not sign the returns they prepare, leaving taxpayers vulnerable to fraud. Legitimate tax preparers are required by law to sign the returns they prepare and include their Preparer Tax Identification Number (PTIN). Before engaging the services of a tax preparer, verify their credentials and ensure they comply with legal requirements.
If you’re worried that you have fallen victim to a scam, first remember that this is not your fault; these criminals are smart and know how to prey on people when they’re most vulnerable and stressed (like when you’re preparing your taxes).
Next, ask for help. The IRS can offer assistance. CLICK HERE for more about that service.
Also remember that if something seems suspicious to you, your financial advisor can help. We are trained in helping clients identify scams and can be a sounding board for you before something catastrophic happens.