7 SIGNS YOU’RE THE VICTIM OF A TAX SCAM

Tax season is officially in full swing, and it’s the busiest time of the year for scam artists. Crooks are working overtime to get their hands on your tax refund and personal information. It’s important to have your guard up whether you prepare your own taxes or seek professional assistance. These people have subtle ways to get the best of even the savviest taxpayers.

The Treasury Inspector General for Tax Administration estimated that tax refunds claimed by identity thieves might have cost taxpayers as much as $21 billion from tax years 2010 to 2014, according to Consumer Reports. Don’t get taken advantage of this tax season. Stay on top of the latest tax scams and tactics used by thieves.

7 Ways to Recognize a Tax Scam

Feeling a bit suspicious about a tax preparer, strange questions posed by the IRS or bogus tax rules you’ve never heard of before? Here are the seven ways to spot a not-so-obvious tax scam before disclosing your personal information:

1. Personal Information Requested by Email

If the IRS sends an email asking you to divulge personal or financial information you’re probably not speaking with an actual IRS employee. There’s currently an email phishing scam circulating where con artists pretend to be IRS representatives and send you a link to a site that looks exactly like the official IRS website. They’ll alert you that “you are to update your IRS e-file immediately” and mention USA.gov and IRSgov without the dot in between “S” and “gov”. If you get this email do not respond. Instead, forward it to the IRS at phishing@irs.gov.

2. Guaranteed OIC Qualification

When working with a tax debt company be wary if you’re told you qualify for an Offer in Compromise (OIC) before you even agree to be a client. If a tax consultant tells you you’re eligible without closely examining your case that consultant is probably a scam artist.

3. Pressure to Inflate Charitable Deductions

Tax deductions are great but only if you do it the honest way. Any tax preparer who encourages you to embellish the amount of money you contributed to charity the previous year is up to no good. Instead of paying a flat rate, these people ask for a percentage of your refund. Thus, they want you to get as much money back from the IRS as possible. Steer clear of these unethical tax preparers as they’ll only get you into trouble with the IRS.

4. Fee Based on Percentage of Refund

To further elaborate, a tax preparer who bases his fee as a percentage of your refund is definitely up to no good. In fact, the National Association of Tax Professionals conducted a survey in 2010 that covered fee structures used by tax preparers. The results revealed that most professionals charge a set rate for each tax form which can vary based on the complexity of each client’s current tax situation.

5. Business Is Slow

The average tax preparer works notoriously long hours during tax season because they’re flooded with business. According to Monster.com, spending 12 to 14 hours a day in the office is not uncommon at all. If you’re instantly able to get an appointment with a tax preparer and arrive at an eerily quiet office, take this as a red flag that something shady is going on.

6. Promises of a Higher Refund

Who doesn’t want to receive a large refund check from the IRS? Scam artists are well aware of this, and they’ll flash the promise of major dollars to draw you into their grips. The truth is it doesn’t matter which skilled, reputable tax professional prepares your return — your refund is going to be the same size. If someone promises a larger refund, they have some tricks up their sleeve that you don’t want to be involved with.

7. You’re Pressured by Phone

If you receive a phone call from the IRS demanding immediate payment asking you to divulge your credit or debit card numbers or threatening to call the police if you don’t comply, you need to hang up immediately. There’s currently a phone scam making the rounds, targeting taxpayers like you. Con artists pose as IRS employees, using fake names and badge numbers, to try to get you to reveal your financial information. Regardless of how much these people seem to know about you never give them any information.

This tax season don’t become a victim of an elaborate tax scam. Keep these tips in mind as you fill out your tax forms, whether you’re doing it by yourself or with the help of a tax preparer.

By Laura Woods

IRS LISTS THE ‘DIRTY DOZEN’ TAX SCAMS YOU NEED TO AVOID THIS YEAR

Filing a tax return is something every income earning American has to do. Because scammers and identity thieves know you’ll be filing taxes, however, this can put you at great risk to have your identity or tax refund stolen, and your personal information compromised.

Not only can scammers cheat you out of your tax refund, they can try to convince you to lie on your return and commit tax fraud.

The IRS does take action against scammers and other tax season predators through its Criminal Investigation unit, working in conjunction with the Department of Justice. But a taxpayer who is the victim of tax fraud could still have to deal with losing his tax refund and needing to correct a misfiled or fraudulent tax return.

The Dirty Dozen Tax Scams of 2015

To help taxpayers protect themselves, the IRS releases its annual list of “Dirty Dozen” tax scams. Taxpayers can review this list so they can avoid becoming a victim or committing tax fraud themselves.

1. Phone Tax Scams

The IRS warns taxpayers against fake phone calls from fraudsters impersonating IRS representatives. Beware if a caller claims to be from the IRS, especially if the caller threatens you. If you receive such a call, hang up immediately and contact the IRS to report the call.

2. Phishing Tax Scams

Scammers will often send emails or create sites that appear to be legitimate from the IRS or tax preparation software. Beware of all strange emails and links, especially since the IRS does not send unsolicited emails, and make sure to only enter personal information through an official and secure site.

3. Identity Theft

Identity theft is the main cause of taxpayers losing out on their tax refund as criminals will use a taxpayer’s Social Security number and other personal information to file a fraudulent tax return and steal a refund. In 2013, $5.2 billion worth of taxpayers’ refunds were stolen, according to the United States Government Accountability Office.

4. Tax Return Preparer Fraud

The IRS warns taxpayers to watch out for “unscrupulous return preparers who set up shop each filing season to perpetrate refund fraud, identity theft and other scams that hurt taxpayers.” While the vast majority of professional tax preparation services are legitimate, this can be a particular blind spot for taxpayers as 60 percent of people file with the help of a tax professional, reports the IRS.

Before hiring a tax preparer, ask to see an IRS assigned Preparer Tax Identification Number (PTIN) as well as other credentials and qualifications.

5. Offshore Tax Avoidance

This is a scam that taxpayers perpetrate by trying to hide income or assets offshore to dodge taxes. The IRS warns against this, and urges taxpayers with offshore assets to file with the IRS’s Offshore Voluntary Disclosure Program to resolve any tax issues and ensure compliance with U.S. tax law.

6. Inflated Tax Refund Claims

A big red flag that taxpayers should beware is any tax preparer promising them huge refunds before reviewing their financial records or charging a percentage of the refund instead of a flat preparation fee. Taxpayers should also never sign a blank return.

7. Fake Charities

Taxpayers should watch out for charity scams all year round in which fraudsters pose as charitable organizations, often using names very similar to legitimate charities, to solicit donations. But taxpayers might not realize that the organization they gave to was fake before trying to deduct the donation on their tax returns. The IRS provides tools on its site for taxpayers to verify the status of charitable organizations.

8. Hiding Taxable Income With Fake Documents

Falsifying income forms, like a 1099, to hide taxable income is illegal. Taxpayers should never do so, and should also drop any tax preparer who suggests faking any information on a return.

9. Questionable Tax Shelters

The IRS said that taxpayers should avoid questionable tax shelters and tax avoidance schemes, as they could be scams or cause the taxpayer to make an unlawful move. If you are ever questioning a tax shelter, tax advice or product, get an independent opinion.

10. Falsifying Income to Claim Tax Credits

It can be tempting to inflate or falsify income claims on a tax return to qualify for larger tax credits, especially for those who are self employed. But the IRS condemns this illegal action and warns taxpayers that anyone who tries to talk them into doing so is likely a scammer.

11. Excessive Claims for Fuel Tax Credits

Many taxpayers might mistakenly try to claim fuel tax credits not knowing that this credit is “limited to off highway business use, including use in farming,” reports the IRS. Taxpayers should avoid mistakenly claiming fuel tax credits as it’s a big red flag for the IRS and could trigger an audit.

12. Frivolous Tax Arguments

Every American is required to pay his fair share and uphold his responsibility to pay taxes. Taxpayers will get in hot water if they try to make “unreasonable or outlandish claims” to contest their responsibility to pay taxes or file a tax return. Filing a frivolous tax return carries a hefty $5,000 penalty.

By Elyssa Kirkham

© 2015 TLC Magazine Online, Inc.