As April approaches, Americans across the country are filing their taxes, receiving their refunds, and making payments to the government. The fear of repercussions from the IRS tends to make people nervous when it comes to tax time because they don’t want to get fined or audited if they accidentally fill out a form incorrectly. Scammers feed on this fear and try to cheat people out of their tax refunds. To make people aware of the problem, the IRS listed a “dirty dozen” types of fraud. Here are 12 scams to avoid this tax season so you don’t lose your money — or your identity.
Phishing scams come through your email and pretend to be official correspondence. Scammers will either ask for your personal information (like a bank account) or will download malware through a link. You can avoid falling for phishing scams by:
- Never sending personal information through email
- Staying alert to potential warning signs like typos in the email address or body
- Checking the sender’s email and phone number online instead of using the contact information or link in the message
If someone calls pretending to be from the IRS and threatening fines, jail time, or deportation, then hang up the phone. This is a phone scam. Hanging up the phone is always an option if you’re unsure about the identity of a caller. Furthermore, the IRS will never accept payment via credit card or wire transfer over the phone, which is another sign that these callers are just trying to take your money.
Tax season brings numerous cases of identity theft. This occurs when someone takes your information and passes it off as their own. Be careful when handing out your social security number, as people can file taxes based on your name and social security number and claim your benefits. If your tax return is rejected because the IRS says it has already been filed, then your identity could have been stolen.
Return Preparer Fraud
There are plenty of reputable software tools that will help you file your taxes for free and get the best refund possible. However, scammers continue to claim to get you better refunds. Avoid people who claim they can get you a significantly bigger refund, or who charge a percentage fee based on how much you get back. They may be manipulating your return and committing tax fraud, which can actually hurt you if they’re caught.
If you want to donate part of your tax refund to a charity, or maybe want to make a deductible donation before you file, make sure you check the reputation of the charity first. Scammers will set up fake charities and make their names seem plausible or similar to major organizations to attract donations. You can look up an organization’s non-profit status on the IRS website to ensure they’re real before you donate.
Inflated Refund Claims
Like return preparer fraud, scammers may promise outlandish refunds when they prepare your tax return. Often they ask people to sign a blank tax form and then fill everything out without the victim’s approval. In fact, you should be wary of anyone who promises you a significant refund before they look at your records. They can’t know what you might get back without first knowing your financial situation.
Excessive Claims for Business Credits
Scammers will often encourage people to file for business credits they’re not qualified for. One example is a research credit, which is offered to companies that conduct research and participate in qualifying activities. Before claiming a tax credit on your account, make sure you completely qualify for it and can back up your claim. Otherwise, you are committing tax fraud and can be held accountable.
Falsely Padding Deductions on Returns
False deductions are a problem along with false credits. A fraudulent tax preparer might try to deduct expenses like your rent, gas, and grocery bill and claim you have a home office. However, the IRS has strict guidelines for home office deductions. You might suspect false padding in your forms if your tax preparer is charging a fee that’s a percentage of your total refund, which means they will collect more money.
Falsifying Income to Claim Credits
False tax credits can be filed for personal as well as business tax forms. Scammers might encourage people to claim they have an extra child or furthered their education in order to receive tax benefits. If the IRS discovers that your tax forms have been filled out incorrectly, you will be held accountable, so make sure your return is accurate.
Abusive Tax Shelters
The vast majority of Americans pay their taxes, and all Americans are required to file a return each year. Even if they don’t owe anything, they still need to file as a way to record their income. Avoid any scam that tells you it’s okay to skip filling out your taxes or that they found a loophole through a business trust or LLC. This is still tax evasion and is still illegal.
Frivolous Tax Arguments
Similar to tax shelters, frivolous tax arguments tell people they don’t have to pay taxes based on religious doctrine or personal beliefs. This is also not true. Everyone living in America is required to pay taxes regardless of gender, race, religion, or creed. These scam artists will only cause you to commit tax evasion and risk jail time.
Offshore Tax Avoidance
Some scammers might promise the ability to hide your money in offshore accounts to avoid paying taxes. They will claim that you can move your money outside of the United States and then only report what you have in this country. Not only is this not true, but they’re likely scamming you and trying to take your money when you move it offshore to what might be their bank accounts.
If you’re unsure about a person, organization, or charity that promises tax benefits, then use CheckThem.com to make sure they’re reputable. All it takes is a few steps to discover the difference between a helpful opportunity and a scammer that could cost you lots of money or even land you in jail.