Tax season opens up opportunities for criminals to take advantage of people. Here are five ways that you can avoid becoming a victim this tax season:
You receive an email that seems to be from a legitimate sender (such as the IRS), and it demands payment for overdue taxes or requests you update your account information. The message asks you to click on a link that takes you to a site where it asks for bank account information, Social Security or taxpayer ID number, or other personal information. Or it may contain an attachment and the message asks you to open it. When you do the attachment places code on your computer that tracks your keystrokes and/or websites to gather your personal information. Often these messages will contain urgent messages that imply you must act quickly. Remember: no government entity will contact you this way and ask that you urgently reply. To help taxpayers avoid online scams the IRS has provided guidelines for staying secure online when preparing your taxes.
2. Fake charities
Donating money to charity is a good way to support a worthy cause and have a tax deduction. Scam artists have been known to set up fake charities that steal purported donor money and/or their identity. You should be wary of charities that have names that sound familiar, yet are slightly different from legitimate organizations. Avoid sending cash if asked, and do not share your Social Security number with a charity. If you would like to confirm the tax-exempt status for a charity you can check the IRS Exempt Organization website.
3. Preparer fraud
Most tax preparers are trustworthy and valuable service providers. Unscrupulous preparers will steal identities or money. Be wary of preparers who:
- Don’t ask a lot of questions
- Only ask for your year-end pay stub
- Base their fee on a percentage of your refund
- Ask you to sign a blank return
- Do not use e-filing
- Do not let you review your return before filing it
Good preparers will:
- Ask for receipts, W-2s, and supporting documentation
- Use e-filing for your return
- Take the time to explain your return and supporting documents
- Be an attorney, CPA, enrolled agent, actuary or retirement plan agent, or Annual Filing Season Program participant and have a Preparer Tax Identification Number (PTIN)
Unfortunately there are bad apples out there. Do your homework before retaining a tax preparation service. One way to screen tax preparers is to use the IRS Directory of Federal Tax Return Preparers with Credentials and Select Qualifications.
4. W-2 fraud
This scam targets restaurants, schools, hospitals and tribal groups. It involves sending an email to make it appear as if it is from an organization executive (this disguise technique is called spoofing). The email is sent to an employee in the payroll or human resources departments, requesting a list of all employees and their Forms W-2. This scam also may involve sending a separate “executive” email to the payroll department that asks that a wire transfer be made to a certain account. The result is that the employees’ Social Security numbers have been compromised, and the organization may also have lost money due to the wire transfer. To learn more, go to the IRS page that discusses this scam.
5. Phone scam.
Scam phone calls that threaten police arrest, deportation, or license revocation are common during tax season. If you receive a phone call or voicemail from someone claiming to be an IRS agent, you can be fairly confident that person is not an IRS employee. Things you can be sure the IRS will not do:
- Call to demand immediate payment using a specific payment method such as a prepaid debit card, gift card or wire transfer. Generally, the IRS will first mail a bill to any taxpayer who owes taxes.
- Threaten to immediately bring in local police or other law-enforcement groups to have the taxpayer arrested for not paying.
- Demand that taxes be paid without giving the taxpayer the opportunity to question or appeal the amount owed.
- Ask for credit or debit card numbers over the phone.
Remember: The IRS rarely contacts taxpayers by phone. If you do receive a phone call like one of those mentioned above, report it to the IRS.
Bottom line: Be wary of phone calls and emails during tax season that purport to be tax-related. When in doubt, you can check the IRS websites dedicated to scams, suspicious emails and identity theft:
- Tax scams/alerts: https://www.irs.gov/uac/tax-scams-consumer-alerts
- Suspicious emails: https://www.irs.gov/uac/suspicious-e-mails-and-identity-theft