It’s that dreaded time of year again: time to file those taxes!
For accountants and law-abiding Americans alike, tax season is a time of stress, digging up old documents and hoping all the ducks are in a row.
For cyber criminals and identity thieves, tax season brings with its limitless opportunities to prey on the innocent and rob them of their hard-earned money. Scam artists are experienced in a variety of schemes that earn them millions of dollars every year. They take advantage of the trusting nature of people. But if you know what to watch out for, you can survive tax season unscathed.
"The bottom line is that under no circumstances will the IRS initiate contact out of the blue asking you to click on a link."
-Raphael Tulino, IRS spokesman
Scammers play on fears, vulnerabilities
Most common tax scams?
2. Identity Theft
Phishing can take many forms, but typically it’s done through phony emails. Often times, a false identity is used as a way to extract personal information from their targets or to plant destructive software into a person’s computer.
The most used variation is someone pretending to be from the IRS contacting a person regarding an "issue" with their filing or return status. They use a scare tactic works by telling them that the only solution is to send their Social Security numbers or bank account information. Or the email will include a link that, when opened, installs into the victim’s computer spyware or malware that can then mine all their files and personal data. This works all too often as people tend to fear the IRS and the threats they can carry out.
The important thing to remember is that the IRS doesn’t contact people via email so luckily, it’s easy to tell it’s a fake!
The IRS advises people to be on guard against groups that encourage them to make “frivolous and outrageous” claims based on the false premise that they are not lawfully obligated to pay taxes.
“While taxpayers have the right to contest their tax liabilities in court, no one has the right to disobey the law or IRS guidance,” the IRS notes in “Get Ready for Taxes: Get 2018 tax documents ready for upcoming filing season”
One of the surest signs of a scam is when tax preparers make unrealistic promises, guaranteeing huge payouts, regardless of an individual’s financial situation.
If it feels too good to be true it most likely is.
Nobody can get you a bigger refund than you’re entitled to.
—Kelly Phillips Erb, tax attorney, taxgirl.com
If people take part, even unwittingly, in schemes where they claim deductions or credits to which they are not entitled, or if they allow others to use their information to file false returns, they could be liable for financial penalties or even face criminal prosecution.
More red flags to watch for
Another red flag is a tax preparation fee based on a percentage of the return instead of a flat fee. “The IRS doesn’t prohibit it, although statistically, those tend to be fraudulent returns, because there is a financial incentive for the preparer to induce you to claim funds you’re not entitled to” said Philips Erb.
It’s also vital to remember: only use organizations and prepares that are licensed. Using a tax service that is well-known, established or registered with the IRS saves not only hassle but establishes peace of mind as well.
Beware the refund anticipation loan
When it comes to collecting their refunds, people are often given the option to either wait several weeks for the Internal Revenue Service to mail a check or to pay a tax preparer or financial institution a fee to receive it right away.
This is called a refund anticipation loan, a short-term loan backed by an expected tax refund. It is perfectly legal, but it can be construed as a scam nonetheless.
For example, a taxpayer may be given a debit card to withdraw the cash from their tax refund. Each ATM withdrawal, however, has a ceiling and carries a fee of up to $2.50 paid to the lender and an additional fee of up to $2.50 paid to the ATM operator. By the time she retrieves all of her refund using multiple withdrawals, these fees may absorb more than 10 percent of the original amount.
This is an extremely expensive way to receive your refund, and if you can wait the three weeks, the IRS will deposit your return into your account… for FREE. If you can swing it, waiting out the three weeks can save you up to 50 dollars!
The bottom line is doing your taxes can be tricky. But if you stick to well trusted preparers, and reach out to the IRS directly with questions you can avoid huge fines and scam artists making off with your hard-earned money!
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