Are you paying too many taxes?
If so, you may have thought of avoiding them. Say “Yes” to tax reduction and “No” to tax evasion. While taxpayers should never lie on their reports, one has the right to minimize them as much as possible.
Some people take that statement too seriously, like stealing data to make someone else pay for their tax. They come up in the form of phishing messages on tax season.
A scammer poses as a tax collector to get your money and information. You think you paid your part, but the taxation office never got a dollar from you. Very quickly, you start getting calls from debt collectors, IRS mail, and whatnot.
Sometimes, you do overpay to the real institution by accident, but at least you can claim a refund. Scammers have also thought of that: they will try to take it before you do.
Imposters aren’t the only ones behind tax scams. Consider professionals:
- An IRS worker stealing from client tax returns
- A fraudulent tax preparer
- Anybody who encourages you to lie about your financial status
If you’re familiar with the basic online scams, tax fraud shouldn’t be new to you. Con men use classic phishing sites, confidence tricks, threatening phone calls, or forged documents. But fraud prevention doesn’t need to be hard once you know how tax scams look and how to stay safe.
Types Of Tax Fraud
Scammers want your data, and to get it, they’ll either ask or promise you money. “You have to fill the form to verify your refund.” “Click here to request your IRS return!”
#1 Phishing Scams
For identity thieves, tax scams are just another method among the dozens they use to steal information. Once they get your banking data, they can open new accounts, ask for loans, and manipulate your credit score.
Some will do it all at once while others do it gradually so you don’t notice. If you start getting unrelated notices, phishing may be the reason.
These “agents” either ask for your credentials on the phone or send you to some form online. The website domain isn’t IRS, but the site looks identical.
If you didn’t have problems with taxes before, it’s better to ignore that message. Identity theft will get you into real problems.
#2 Questionable Tax Preparers
You’re facing a complex tax situation and running out of time to file your form. A tax preparer can get things done faster IF you know how to pick them.
Hiring one can cost anywhere from $100 to $300. Some people won’t spend a couple hundred for someone to organize their funds, so fraud preparers come in with lower prices.
Unlike legit tax preparers:
- The fraudulent preparer has no Preparer Tax Identification Number (PTIN)
- The preparer won’t represent you as a client
- There’s no guarantee a preparer with no history will fix your tax situation.
#3 Fake Stimulus Checks
Most taxpayers qualify for stimulus checks worth thousands of dollars. The government mails these during key events to boost the economy.
These checks are used very rarely: the last group the US sent was in 2008s recession. Unfortunately, these events create unique opportunities to scam with fake checks.
The next time you find an IRS check in your inbox, don’t get excited too early. It costs nothing for scammers to print and send these to thousands of citizens. A fake check bounces back after a few weeks, and any amount spent from the check will disappear.
Even worse, scammers can fool the government that you’ve already received a check. They won’t send you any, and you’ll keep the fake one.
Tax Fraud Red Flags
Are you getting notices you can’t explain? Are you having issues recently despite never having them in the past? The worst red flag you can find: someone has claimed the refund before you.
If a scammer enters the system, the problem may have nothing to do with your taxes.
#1 Tax Season Messaging
You’re filed your form early in the year, yet the IRS is messaging you in the middle of tax season. You owe nothing, but their message says quite the contrary:
“There’s a return pending due to misstated information. Please, file here.”
Scammers know some citizens secretly lie about their income to reduce taxes, even if it’s only a little. The taxpayers who relate will redirect to a phishing site and lose their credentials and refund.
The IRS should never call your phone number, send SMS, or email. If you get an informative message, they’ll put the call-to-action as a list of steps, not a link. All IRS messages have an impersonation warning at the bottom.
#2 Unrelated Messages
How can the IRS ask you for some money you don’t owe? Why do you get so many notifications? Is an identity thief trying to share his load with you?
Phishing messages rarely start with returns, because taxpayers can check them. And if they tell you to send money you already sent, most people would ignore the scammer’s message.
However, everybody wants a tax refund. The IRS will send you money if you’ve overpaid last year’s taxes. Some messages ask you to resubmit the file or fill a form before claiming your refund. Perhaps they want to issue the refund sending you an IRS check. Strange.
How do they know you deserve a refund if they haven’t checked your form? Unfortunately, this free money hook is a scam.
#3 Odd Requests
Con men can pose as tax preparers to collect all your information. Do they ask for SSN, card number, address, and file screenshots before you even see the form? Don’t wonder why you get your refund stolen.
Licensed tax preparers should adjust the tax return to your case, including exemptions and credit to lower the amount. Others will prepare a generic template, and others will tell you to send them the return instead of the US Treasury.
Check the IRS guide on choosing the right tax preparer. What type of preparer are you looking for? Do you even need one?
How To Prevent Tax Scams
From the trillions of dollars that taxpayers have gathered, they lost at least $80 billion in tax fraud. Faulty payment methods, bogus preparers, phishing websites.
Some people already look at paying taxes somehow “unfair” or intrusive. What worse than paying a scammer plus your real taxes? Make sure those $80 billion lost aren’t yours by following these steps.
#1 Prevent Data Breaches
Scammers who impersonate you on the tax return don’t require much information. They just need the login credentials of some messaging apps like email and SMS.
If they get the password via phishing/stealing your phone, they can see all the receipts and documents you’ve sent. If you’ve uploaded a tax form, they can find your address, SSN, and income generated.
That’s enough to open new bank accounts, take loans, or move their debt to your name.
Since these happen online, you should check your cyber protection often: 2FA Codes, trusted devices, opened sessions, attached files, and so on.
#2 File your Tax Early
On tax season, before taxpayers file, scammers would step in, steal their identities, and take their tax refunds, which most citizens qualify.
Those who overpay their taxes find their return stolen by these fraudsters. But how? A scammer could have installed spyware or stolen your information. They login from time to time to see any notices you receive.
If the IRS sends you a return, they’d be the first ones to claim it. Instead of waiting for the last minute, file early to get rid of them. Plus, the sooner you send the tax refund, the longer you can keep next year’s funds.
#3 Fraud Alert
If you suspect that someone has stolen your account, a fraud alert can increase security. You can still use your accounts but require more verification than usual.
As soon as they collect your data, scammers start by clearing your bank accounts. Freeze your credit until you fix the privacy issue.
These measures shouldn’t affect your credit score. A fraud alert will last one year before it expires, even less if you tell the bank to cancel it.
#4 Validate Your Tax Preparer
When you’re short in time, tax preparers can solve complex return situations. You can skip this step if you file early.
Not everyone who calls oneself a tax preparer will help you. Some red flags include:
- Requesting a form you already submitted
- Sending the return to the preparer, not the IRS
- They want you to sign an empty form (for forgery)
Avoid preparers with odd requests and look for PTIN preparers. If anything goes wrong, preparers can represent you in case there’re issues with your return.
Despite the burden of tax expenses, it’s better to pay for a good cause than give it away to con artists. Understand what the IRS will and won’t do to spot official alerts from phishing messages.
On the other side of the coin, citizens should never commit fraud by evading taxes. If the IRS asks you for a document, chances are they already have it. They just test how diligent you are on your duties.
Reducing taxes is 100% legal, however. If you’d like to save more money, consider:
- Converting your savings into loans (which you can’t tax)
- Splitting revenue among family members to get lower %s
- Moving to a low-tax state or a tax-free country
- Converting your money into assets
- Sending money abroad (tax havens)
- Becoming a corporation