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.

 

All opinions expressed in this blog post reflect the judgment of Approach Retirement Advisors, LLC (“Approach”) as of the date of publication and are subject to change. The information in this blog post is believed to be factual and up to date; however, we do not guarantee its accuracy. This blog post should not be regarded as a complete analysis of the subjects discussed. This presentation is for educational purposes only and does not constitute personalized investment advice. A professional advisor should be consulted before implementing any of the strategies presented. This blog post should not be construed as an offer to buy or sell or as a solicitation of any offer to buy or sell any securities mentioned herein. Clients and members of Approach may own any securities mentioned herein. Investments are subject to market risks and potential loss of principal invested, and all investment strategies have the potential for profit or loss.  Past performance is no guarantee of future results. Different types of investments involve varying degrees of risk. There can be no assurance that any specific investment will be suitable or profitable for a particular investor’s portfolio. There are no assurances that any portfolio will match or outperform any particular benchmark.