The Internal Revenue Service — charged with collecting taxes from American taxpayers — is more feared than hated. The power of the IRS is legendary, having been used to bring down many of the country’s most infamous criminals, including Al Capone. Those who prey upon upon honest unsuspecting citizens can use this power to perpetrate tax fraud. Posing as the IRS is common among fraudsters, but by no means is it their only tactic.
Some scams happen online; we’re all familiar with the Nigerian “4-1-9” scam. Other scams happen out in the real world. Unscrupulous individuals pretend to be “professionals”; long-lost friends turn you on to some exciting opportunity. Now that it’s tax time, and we’ve all got money on the brain, let’s review a few common methods that con artists use to separate you from your hard-earned cash.
Emails that purport to come from the IRS are more prevalent around tax time and should be viewed with a skeptical eye. According to the IRS website, “the IRS does not initiate contact with taxpayers by email to request personal or financial information.” Nor do they reach out through social media websites like Facebook or Twitter. This also goes for organizations and agencies linked to the IRS, like the Electronic Federal Tax Payment System. So any online inquiry for financial or personal information should raise a huge red flag. If in doubt, show the email to your tax preparer, or report it to the IRS at email@example.com.
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The IRS says that the number of false tax returns — those in which someone files under someone else’s identity — has been increasing for years. An identify thief may use a real person’s information to get a tax refund. While the IRS says it has protected countless citizens from identity theft, which could result in a fraudulent return, the individual must still be vigilant. Keep an eye out for any letter from the IRS noting multiple tax returns or wages from an unknown employer. These are two signs of possible identity theft. The IRS has a special identity theft page that can be accessed at http://www.IRS.gov/identitytheft if you feel your personal information has been misused.
Who Does Your Taxes?
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Tax preparation has become so complex that going to a professional seems smart. But even if the company is above board, the person preparing your taxes might not be. The IRS has encountered cases in which tax professionals inflate prices and skim cash from refunds. These days, tax preparers must enter a Preparer Tax Identification Number (PTIN) on every return they prepare. If the PTIN is missing, a scam might be on. Other warning signs include unrelated forms showing up in your tax return and a requirement to split a refund or pay a percentage of it as a preparation fee. Providing false information to improve a return is obviously against the law. When in doubt, go to another tax preparer.
Flyers stuffed in mailboxes, pushed under doors or taped to telephone poles may offer ways to file tax returns without the requisite documentation. Take a deep breath before acting, this is probably a scam. Preying on low-income and elderly taxpayers, scammers attempt to frighten people and then help them avoid problems. Sometimes they simply offer bad advice for a fee. Social Security rebates and refunds are common examples. Money is required upfront, of course, and details are scant. The filer’s tax return eventually comes back rejected, but the con artists are long gone by then.