Tax scams cost us billions - here's how to spot and avoid them : Internet Scambusters #1,104
Tax scams now run throughout the entire year but the peak season is right now - and the crooks are out to get you.
But if you know how the IRS and state tax departments operate, along with other warning signs of a scam, you won't get caught out.
In this week's issue, we tell you about the latest tax scams, how taxing authorities work, and other steps you can take to beat the fraudsters.
Let's get started…
Be Tax-Scam Smart to Beat the Crooks
You worked hard for your money, right? But that doesn't mean a thing to tax scammers, who want to take as much of it as they can away from you.
Every year, the crooks defraud taxpayers out of billions of dollars and the number is climbing fast every year - $5.7 billion in 2022.
Now, you're preparing to file your 2023 return, or maybe you already did, and you want to keep as much of your earnings as you can.
So, can you beat the heartless thieves this time around?
Yes, if you know what they're up to and how to spot their tricks. But that's not always easy since tax scammers come up with new tricks every year.
Latest Tax Scams
Each year, the IRS compiles a tax scam list they call the "dirty dozen." Last year's list includes phishing for your identity details so scammers can file a phony return, offering fraudulent online tax help services, claiming donations to fake charities, using unscrupulous tax preparers, and bogus tax avoidance schemes.
All of these scams are still running today and, of course, there is also a clutch of tricks that play out throughout the year, mostly posing as the IRS and falsely claiming either that you owe money or you're due a mouthwatering refund.
Most recently, potential victims have received a mailing in a cardboard envelope from a delivery service. It contains a letter with an IRS logo asking you to call a number "in relation to your unclaimed refund." It's a blatant phishing attempt to steal your Social Security number and other confidential details.
Fake newsmongers are also at work, posting on social media about supposed ways of getting a bigger refund, including manually filling out a W-2 wage tax form to claim false credits.
Other recent scams include use of video relay services (VRS) to try to trick deaf and hard of hearing individuals, and fake emails seeming to come from the Taxpayer Advocacy Panel, a genuine, voluntary organization.
Scammers are also known to target immigrants and others who don't speak English as a first language, who may not be familiar with the way taxing authorities work.
Another sneaky trick is when scammers tell victims to make checks payable to "IRS," which they then alter to "MRS." The correct payee is "US Treasury."
What You Need to Know
Tax scams are so successful because most of us don't know how the IRS and state tax departments operate. If you do know, you'll be able to spot many of the scam attempts at the outset. For example:
- They don't initiate contact via phone, email, or text. They send letters by snail mail.
- Nor do they ask for personal or financial information by phone, email, or text at the outset, though you may be asked for verification information if you contacted them first.
- They don't accept payment via untraceable methods such as cybercurrency, gift cards, or money wiring services.
- They don't threaten police involvement, arrest, or deportation for alleged outstanding tax payments. If you are in dispute with them, it's generally a drawn-out process, not an instant "pay up or else" approach.
- Nor do they threaten to revoke your Social Security number or other identification - they have no power to do so.
- If they call you, they don't use recorded messages. If it's not a human on the other end of a call, it's almost certainly a scam.
What You Need to Do
If anyone uses the ruses mentioned above, it's a scam and you can ignore them. But if you're unsure about what to do, contact the IRS. The main customer service number is 800-829-1040.
Here are more actions you can take to steer clear of the tax scammers:
- Don't trust anyone who tells you they can get a bigger refund if you pay them first.
- Carefully check the reputation and credentials of any tax preparer you're thinking of working with. And remember, most, if not all, don't ask for payment until they've done their job.
- Watch for red flags in communications and on websites, such as poor spelling and grammar, and use of emails or text attachments - just don't click them.
- Only donate to charitable causes you have verified as genuine. If you donate to a fake charity, you can't deduct your contribution. If you try, you could be in trouble.
- Never assume that contact seeming to come from the IRS, state taxing authorities, or tax preparers, even letters, is genuine. Always be skeptical and check it out carefully.
- Use up to date security software that verifies websites you visit are genuine.
- Never be persuaded to file false information on your return. It's illegal and you could end up in court.
- Closely monitor your credit record to spot any activity that suggests your identity has been stolen.
- Always file your return as quickly as you can. The faster you send it, the less risk of being scammed.
There's lots if information on the irs.gov website, including this page that explains how to know if it's really them contacting you.
You can also get in touch with your local Taxpayer Assistance Center.
Have You Been Tax-Scammed?
Oftentimes, the first indication you've been tricked by tax scammers is when you file your return and learn someone else already did that in your name.
Prior to that, be on the alert if you receive forms you didn't request, a transcript of a conversation with you that never took place, or a refund you weren't expecting (sometimes even before you sent in your return).
And if you do find yourself on the receiving end of a tax scam, report it immediately.
This Week's Alert
Funeral Homes: A recent undercover phone call sweep of funeral homes has exposed dozens of establishments allegedly violating rules that require them to be clear about their pricing. We covered this topic in issue #243. Find out how to stay safe at Rolling Over in the Grave: Three Funeral Scams.
That's it for today -- we hope you enjoy your week!