Financial stress is a constant burden for many, and with tax season upon us, individuals become susceptible to tax fraud. Fraudsters are always looking for their next victim, and recently, scams have become more and more tricky. But don’t stress – Elements is here to make sure you’re informed on the common tax scams and how you can protect your personal information.
What is Considered a Tax Scam?
Tax scams are fraudulent schemes designed to take advantage of taxpayers and steal personal information. Identify theft is one of the most prevalent forms of tax scams, and it continues to top the list of fraud reports filed with The Federal Trade Commission (FTC).
In the first half of 2024, they received over 500,000 identity theft reports. Most victims don’t realize they’ve been scammed until they attempt to file their taxes. There are many ways fraudsters can target you. Here are some common methods to look out for:
1) Impersonation Scams
Fraudsters pose as the Internal Revenue Service (IRS) and send fake emails, text messages, and voicemails to manipulate victims into giving up sensitive data. They use this information to commit tax fraud and other cybercrimes. They’ll even use common tax software names to send you fake bills or misleading mail about unclaimed refunds.
2) False Charities
With this type of scam, fraudsters impersonate or create false charities to solicit donations for tax deductions. They may set up convincing websites or social media profiles, asking people to donate money for a made-up cause.
3) Mail Theft
Scammers are going through mailboxes looking for tax forms that contain personal information, such as your social security number, to file fraudulent tax returns. This type of scam is dangerous because it’s often harder to track down.
4) Tax Preparer Schemes
Not all scammers pose as the IRS; some create their own fraudulent tax businesses. They advertise low filing fees to lure clients, only to steal their information and withhold refund money from the taxpayer.
These impersonators use demanding and fearful tactics to get what they want. They create a sense of urgency and will threaten you with punishment if you refuse their demands. It’s important to stay vigilant of anyone requesting payment or sensitive information such as your date of birth, social security number, or account details through these methods. Remember, the IRS will not call, text, or email to ask for information.
How Can You Protect Yourself?
As you gather your important documents, here are some filing tips to help keep you protected:
- Be cautious of phishing attempts. Fraudsters create websites that can infect your phone with malware – allowing them to spy on your smartphone activity. If a text message or email contains suspicious language or a link to an unknown webpage, it’s best to ignore it.
- Visit websites and contact companies directly. If you receive communication from an organization and you’re unsure if it’s legitimate, don’t respond to the message. Instead, do your research and contact the company directly.
- Monitor your mail. With the increase in mail theft during tax season, checking your mailbox regularly is crucial. USPS offers a free service that sends you daily notifications about the mail you’re set to receive, which can help with tracking letters, bills, etc. It’s also wise to shred any unnecessary mail containing sensitive information before completely discarding it.
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Use caution when choosing your tax professional. If you’re filing your taxes with an independent tax preparer, be sure that you understand the taxpayer's qualifications and credentials. By law, all paid preparers must sign and include their Preparer Tax Identification Number (PTIN) on any tax return they prepare. It’s also crucial for your tax preparer to sign your documents and provide proper receipts. Choose a tax preparer that’s right for you.
If you feel that you’ve fallen victim to a tax scam, contact your financial institution and freeze your credit reports as soon as possible. Elements Financial is here to support you with advice and education so that you can file your taxes worry-free! For more information about reporting tax scams, visit www.irs.gov.
This information is provided for informational purposes only. It does not constitute legal, tax or financial advice. Consult with your tax, legal or financial adviser before taking any action.
