Tax Day is just around the corner. If you haven’t filed yet, it’ll be here before you know it. And with it so close by, the IRS has a few reminders about watching out for tax scams. It is an annual event and is called the “Dirty Dozen” list of scams that target taxpayers and while many are related to phishing and identity theft, some are philosophies or avoidance that may just land you in a lot of hot water.
Topping the list is phishing. Phishers try to get personally identifying information (PII) with fake websites or by using email. There are so many variants of phishing for information that lead to tax fraud that it’s not reasonable to list them all. Just be aware they are out there and not click links that are from unknown senders or are not expected.
Phishing via phone calls has been rampant this season. It’s referred to as vishing and scammers pose as IRS agents trying to gain PII. They may make threats of outrageous fines or even jail time, or even deportation, if you don’t give them what they ask for. The best defense is not to pick up the phone if you can’t tell who is calling. If it is a legitimate call from the IRS, you should be expecting it. The IRS does not initiate communication via phone calls about a case. They will send you a letter in the U.S. Mail first. If you do pick up, just hang up. Avoid saying anything at all and most certainly don’t give them personal details.
Since the Equifax breach a couple of years ago, identity theft is a big concern. That breach affected roughly half the population of the U.S. Thieves use any information they can to commit tax fraud and get your refund before you can. The best way to avoid this is to file your taxes early. Don’t wait till the last minute every year. Pull that band aid off quickly and just get them done earlier in the season.
The IRS states that almost 60% of taxpayers have someone else assist with or prepare their returns. That leaves a lot of room for identity theft. Use caution when choosing your tax preparer and only use those willing to sign the returns and enter the IRS Preparer Tax Identification Number (PTIN).
Coming in at number five are inflated refund claims. Scammers may promise free money that is tied to inflated refunds. Often abused in this way are the Earned Income Tax Credit (EITC) and the Additional Child Tax Credit (ACTC). Tax preparers who do these “for you” are likely going to land you with a big fine and/or jail time. If it sounds too good to be true, it most certainly is.
At number eight on the list is fake charities. We all like to help those in need, but there are a lot of phony charity organizations out there that like to take advantage. To avoid falling for these, only donate to recognized charities, those with which you are familiar enough to trust, or nationally known ones. You can do research on the Internet to find out if they are legitimate. These days, if there is a fake one, it’ll show up in a search.
Others on the list include falsifying income in order to claim credits, padding deductions, making excessive business deduction claims, putting money offshore to avoid taxes, and using “frivolous” tax arguments such as it’s not in your religious beliefs to pay taxes. Also, claiming that only federal employees have to pay taxes could land you in jail. It’s simply not true.
Finally, using tax shelters to evade paying taxes is frowned upon by the IRS and may make your wardrobe choice a very simple “which orange jumpsuit do I wear today?” If an advisor claims that by adding trusts within trusts will get you out of taxes, don’t trust them. Be sure to know the tax laws that might land you in big trouble.
Always keep in mind that the IRS will never initiate contact with you via email, the telephone, or by text message. If it wants to reach you, you will receive an official letter in the U.S. Mail. When in doubt, call using a phone number you get off the official IRS.gov website.