Tax fraud costs billions of dollars each year, according to the IRS. To protect yourself from falling victim to a tax scam, learn how to protect your sensitive financial information from identity thieves. Whether you do your taxes by yourself or use a tax preparer or CPA, this article highlights five scams that all taxpayers should be aware of. Learn how to spot signs of fraud and protect yourself from the financial and other costs associated with tax scams.
File your taxes early
One of the best steps you can take to protect yourself from scammers is to file your taxes as early as possible. Basically, you can preempt scammers who may try to steal your identity and file a tax return in your name. There’s no good reason to wait until the last minute, so taking this extra step can be a good defensive move. The beginning of tax filing season usually shifts a little from year to year, but generally the IRS begins to accept tax returns at the end of January or beginning of February.
Avoid identity theft
Thieves may try to steal your identity in order to get your tax refund. These scammers will pose as the IRS to try to get you to divulge your personal information. You might receive fraudulent phone calls or emails claiming to be from the IRS, so it’s important to be on the lookout for these and disregard them. Carefully review emails, just as you would with any phishing email.
Remember that the IRS never contacts taxpayers via email, text message, or social media channels to request personal or financial information. Communication is usually initiated by letter in the mail. The IRS also won’t threaten you with arrest or deportation, or demand immediate payment via wire transfer or gift card.
Beware of remote desktop malware
You may receive notifications via text, phone, or email urging you to contact the IRS and allow them to access your computer remotely to walk you through the supposed issue and rectify it. However, don’t take the bait. Downloading this software will give the scammer full access and control of your computer, allowing them to drain it of every bit of data contained on it. Always be cautious about giving remote access to anyone, regardless of who they claim to be. Certainly, the IRS is not in the business of providing remote IT support to taxpayers.
Fake charity scams
Every time a disaster occurs in the world, it unfortunately also spawns a lot of fake charities that seek to defraud unsuspecting people out of their hard-earned money. Because taxpayers can still claim a deduction for charitable donations, charity scams tend to increase around tax season. Don’t let a caller pressure you into making a donation on the spot. Reputable charities should have a website they can point you to for review before you donate. Another way to verify a charity is to ask for its exact name, website, and mailing address to confirm later. When you do donate, it should be by credit/debit card or check, not a gift card or wire transfer.
Americans are a generous bunch, so make sure your giving makes the biggest impact by vetting charities before you give. Charity Watch is a great resource for vetting charities or finding one to support based on the cause. Consumer Reports also has a helpful list of the highest- and lowest-rated charities along with additional tips for giving wisely.
Fake identity theft scams
Just as malware is often disguised as antivirus software in order to trick people into downloading it, some scammers have started making calls and sending emails warning people that their identities have been stolen and immediate action must be taken. The scammer acts as an agent of the IRS or other organizations and then collects vital data from their targets. Before responding to a message designed to alarm you, take independent steps to check for identity theft. For example, you can access free credit reports from the only website authorized by federal law. Checking your credit reports and recent bank account statements will let you know if any unauthorized transactions have been processed or new accounts opened.
Beware of ghost tax preparers
While there are plenty of reputable tax preparers out there, some scammers will pose as tax prep professionals without actually having the qualifications to do so. As a U.S. taxpayer, you are personally liable for the contents of your return, and you can face substantial penalties if your return is inaccurate—even if it was prepared by someone else. Be sure to research the individual or company that you are paying to do your taxes, to avoid falling into this situation.