Don't Fall for These Scams at Tax Time

/ BY / Identity Theft

Scams involving money carry a double whammy; you lose initially by whatever amount the scam artists get from you, and you can lose long term because thieves who get hold of your credit card numbers or other financial information can ruin your credit record and your credit score.

According to the Internal Revenue Service, many of these thieves ramp up their activities at tax time. Here are some of the scams that they’ve identified:

1. Identity theft

Someone who gains access to your personal information (name, address and Social Security Number, for example) may fraudulently file a tax return and claim a refund. The problem is so large that the IRS has 3,000 people working on identity theft related cases, and has trained 35,000 employees to work with taxpayers to determine if there’s been identity theft. You can find more information and learn how to protect yourself at the special IRS web pages on Identity Protection.

2. Phishing

Did you receive an email from the IRS telling you that you had a tax problem? Did it direct you to a website to straighten the problem out, and then ask for your personal information? Don’t respond to any unsolicited emails from someone claiming to be from the IRS; the agency says it does not initiate contact with taxpayers by email to request personal or financial information.

You should report any such emails to phishing@irs.gov.

3. Return preparer fraud

Although most tax return preparers are honest, there are people who will pose as preparers to gain access to a taxpayer’s personal information and/or tax refund. The IRS has advice on choosing a tax professional to avoid getting caught in this scam.

4. "Free Money" from the IRS and Tax Scams Involving Social Security

These scams promise tax refunds to people with little or no income and often target members of a community churches. The thieves will charge for advice on how to get money back from a non-existent stimulus payment or tax refund. There are similar scams involving Social Security refunds or rebates. If someone claims to be able to deliver such a refund, contact the IRS directly to verify.

5. Impersonation of Charitable Organizations

This happens most frequently in the wake of a natural disaster, when people want to donate to help out its victims. Scammers pretending to be part of a charitable organization may solicit money and keep it for themselves. Some scammers even prey on victims, pretending to be IRS agents who want to help victims sort out the tax implications of their losses. To protect yourself, donate only to legitimate charities whose names you recognize (and don’t be fooled by close or sound-alike names). The IRS maintains a search tool, Select Check that you can use to verify the legitimacy of an organization.

If you’re a disaster victim with a tax question, you should call the IRS directly to avoid any problems.

Don’t scam the government

Taxpayers may also try to pull one over on the U.S. government. If you’re a taxpayer filing a return, the IRS may identify you as a tax scammer if you:

  • Try to avoid paying taxes by hiding money in offshore accounts
  • Falsify your income and/or expenses or claim tax credits to which you’re not entitled
  • Falsely claim zero wages using a FORM 4852 (substitute Form W-2) or a “corrected” Form 1099.
  • Misuse trusts in an attempt to avoid tax liability
  • Set up bogus corporations to disguise the true ownership of a business so that you can hide business income, claim fictitious deductions and avoid filing tax returns

For more information on all of these scams—and a few more—read the IRS Dirty Dozen Tax Scams or watch the YouTube video.

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Please note your financial situation is unique and our tips & advice presented here may not be appropriate for your situation. CreditCardXpo.com recommends that you seek different advice & opinions from your own accountant or financial adviser who understands your individual circumstances before making any important decisions or implementing any financial strategy.