Home > Identity Theft > The Tax Scams That Could Cost You Your Refund

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You may dread tax season, but scammers love it. From stealing people’s personal information to trying to pull the wool over the eyes of the Internal Revenue Service, some people go to extraordinary lengths to make money by cheating the tax system.

In a recent post to its website, the IRS listed its Dirty Dozen Tax Scams, 12 of the most common ways fraudsters try to profit from or evade taxation. Many of the scams are predatory, meaning consumers need to watch out for people trying to steal their personal information or capitalize on confusion surrounding tax filings.

A familiar foe tops the list.

Identity Theft

Tax fraud is the most common form of identity theft, and identity theft is one of the biggest tax-fraud tactics out there.

Sometimes there’s not much you can do. If you have no idea your Social Security number has been compromised, you may not find out someone has filed for a refund under your name until it’s too late, and at that point, it’s up to you to act quickly to minimize the negative impact from the fraud.

If you have reason to believe your personal information has been compromised and may be used by a thief to file a fraudulent tax return, contact the IRS Identity Protection Specialized Unit (800-908-4490).

Identity theft can make a mess of your credit, but your credit report and scores can help you spot fraudulent activity. By comparing your credit score from month to month (make sure you’re comparing the same scoring model), you’ll be able to notice a sudden change in points, which may indicate fraud. You can use the Credit.com Credit Report Card to monitor two of your credit scores every month for free.

Phone Scams

These people call claiming to be the IRS, and they can be convincing and intimidating. The caller ID may say it’s the IRS on the line, but that can be faked. The scammer may provide a bogus IRS badge number, and the person on the other line may even have the last four digits of your Social Security number.

Bottom line: Do not give any personal information over the phone to someone claiming to be from the IRS. Scammers may turn hostile, threatening you with jail time or other consequences, but you should address any questions about paying taxes by calling the IRS: 800-829-1040. It’s sort of a “don’t call me, I’ll call you” philosophy — take up any tax issues by making the contact yourself.

Phishing

The same goes for email. It’s simple: The IRS will never initiate contact with you about tax payments via email. Scams appear legitimate, but you should never provide sensitive information over email, let alone all the information someone would need to fraudulently file a tax return in your name.

False Promises

If you see an offer from someone claiming they’ll prepare your taxes so you get a HUGE refund, proceed with caution.

It’s understandable you would be drawn to someone who says they can help you maximize your tax refund, and that’s exactly why fraudsters take this approach, targeting low-income, elderly or non-English-speaking people.

The IRS reminds consumers that honest tax preparers give customers a copy of the return they’ve prepared, which scammers often do not do.

“Victims also report that the fraudulent refund is deposited into the scammer’s bank account,” the post says. “The scammers deduct a large ‘fee’ before cutting a check to the victim, a practice not used by legitimate tax preparers.”

Preparer Fraud

On that topic, if you’re having someone else help you prepare your tax return, make sure you trust their abilities. No matter who prepares your tax return, you are legally responsible for what’s on it.

Repeat: You are held accountable for what’s on your tax documents, even if you didn’t fill out a single form yourself. Tax fraud is illegal and carries some steep penalties, so don’t take tax preparation lightly.

In short, if someone is offering you a massive refund in exchange for pricey tax-preparation services, beware.

Charity Scams

This is a year-round advisory: Charitable donations are a great way to save money on your taxes, and after major disasters, false charities pop up to take your well-intentioned money. Come time for filing your taxes, you’ll be out your donation and the deduction you wanted to claim from it.

When donating money to the cause of your choice, make sure the charity is legitimate. Unfortunately, there are a lot of scammers out there who try to turn a profit by riding the coattails of death and destruction.

Being aware of these scams should help you avoid getting duped, but you should also know not to cook the books on your own. Rounding out the dirty dozen, the IRS highlighted several consumer tax tactics that will get you in trouble, including offshore accounts, falsely claiming zero wages and false income, exemptions and deductions.

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