Tax season may be a hectic time of year. Scammers may also try to take advantage of the stress associated with paying taxes. On the other hand, knowing about popular tax tactics can help you recognize them and prevent being a victim.
Common Tax Scams
Taxpayers should be alert to the following common tax scams:
- Phishing Scams
A sort of online fraud in which thieves seek to steal sensitive information from victims using bogus emails, texts, or phone calls.
Scammers may send emails that appear to be from the IRS, requesting that the receiver click on a link and provide personal or financial information. If the recipient does not comply, these emails may include threats of legal action or other penalties.
To prevent being a phishing scam victim, remember that the IRS will never contact taxpayers via email, text message, or social media. Do not click on links or supply personal information if you receive an unsolicited message from someone purporting to be from the IRS.
Report the communication to the IRS at firstname.lastname@example.org instead.
- Identity Theft
Identity theft occurs when someone utilizes the personal information of another individual to perpetrate fraud. Identity thieves may use stolen Social Security numbers and other personal information to file bogus tax returns and claim refunds in the context of taxation.
Victims may suffer large financial losses and damage to their credit ratings as a result.
Keeping your personal information secure is critical to protect yourself against identity theft. This includes using secure passwords, being cautious when sharing personal information online, and monitoring your credit reports regularly for any questionable behavior.
- Fake Charities
Fake charities are charity organizations that falsely purport to be charitable. Scammers may establish bogus charities and solicit taxpayer donations, promising tax breaks in exchange for their contributions. Unfortunately, these deductions are illegal, and taxpayers who donate to bogus organizations may face IRS penalties and fines.
Always verify the credibility of any charity before donating to prevent falling victim to a bogus charity scam. This can be accomplished using the IRS’s Tax Exempt Organization Lookup tool, which provides information about reputable charities qualified for tax-deductible contributions.
- Inflated refund claims
Taxpayers that file tax returns with exaggerated or faked deductions, costs, or credits to earn a greater refund than they are entitled to are victims of the inflated refund claims scam. This scam might involve either the taxpayer voluntarily submitting incorrect information or a dishonest tax preparer preparing the return on the taxpayer’s behalf.
Taxpayers must understand the types of deductions, costs, and credits they can claim on their tax returns and ensure that their income and expenses are appropriately reported. Taxpayers should also be wary of any tax preparer who promises a substantial refund or encourages them to claim deductions or credits they do not qualify for.
- Preparer Fraud
Preparer fraud is a tax scam in which a tax preparer prepares a tax return for a client but includes incorrect or misleading information to enhance the client’s refund or minimize their tax burden. Claiming false deductions or credits, misrepresenting income or expenses, or claiming credits or deductions to which the taxpayer is not entitled are all examples.
To avoid becoming a victim of preparer fraud, taxpayers should exercise caution when selecting a tax preparer and conduct thorough research before committing their tax returns to anyone. They should investigate references and credentials to ensure the preparer is respectable and knowledgeable.
Taxpayers should also carefully study their tax returns before signing them and be suspicious of any preparer who promises a substantial refund or suggests questionable deductions or credits.
- The fake IRS call or letter
A frequent tax fraud is the phony IRS letter or phone call scam, in which the scammer contacts the victim via mail or phone, purporting to be an IRS official. If the victim does not agree, the fraudster would generally demand quick payment for overdue taxes or fines and threaten them with legal action, such as arrest or deportation.
It is critical to remember that the IRS will only contact taxpayers by phone or email after first providing written notification. A letter or phone call from someone claiming to be an IRS official is a hoax. Do not disclose personal or financial information or make any payments unless you have confirmed the request’s validity.
- Employment related scams
Employment-related scams are tax evasion schemes that involve bogus job offers, usually made online or via email, to collect personal or financial information from the victim. These scams frequently target college students or young individuals seeking part-time or seasonal work.
To prevent being a victim of an employment-related scam, job seekers should be wary of unsolicited job offers and conduct thorough research on any possible employers before providing personal information. They should also know job offers that demand a fee or advance payment for equipment or training.
Indications That You Have Been Scammed
Watch for these unexpected symptoms that you may be a tax scam victim. Some of these signs are:
- You are asked to pay additional tax, receive a return, or receive other communications regarding a tax filing in a year in which you did not file a return
- More than one tax filing was made using your Social Security number
- IRS record shows you earned income from employers you do not work for.
The Bottom Line
To summarise, tax scams can take many forms and can be performed by people or groups trying to defraud taxpayers. Identity theft, phishing schemes, preparer fraud, overstated refund claims, and employment-related scams are all prevalent tax scams
. Taxpayers in San Diego, like those everywhere else, should be aware of these scams and take precautions to avoid becoming victims of scammers.