Although tax scams can happen year-round, the volume picks up between January and April each year. As taxpayers are collecting documents and waiting for W-2s to arrive, scammers are busy trying to steal your identity and cheat you out of your hard-earned money. Luckily, knowledge is power–if you learn to spot the signs of a tax scam, you can avoid falling victim to one. In this article, we’ll cover six common tax scams to watch out for this year.
Phone Calls or Texts from the “IRS”
You should be on the defense if you receive a phone call from someone claiming to be an IRS agent. These scammers will often ask you to verify personal information in order to file and claim your return themselves, and will often make threats, demand payment, or become hostile if you ask questions or don’t go along with what they’re asking. If anyone calls you out of the blue stating they’re from the IRS, hang up. The IRS usually initiates contact by sending letters. They will never call to demand immediate payment or threaten you with arrest or deportation. If you’re not sure, you can always call the official IRS number to see if there’s actually an issue with your taxes.
Charity Donation Solicitations
Unfortunately, charity scams are very common during tax season, as well as the preceding holiday season. Either in person or over phone or email, scammers will try to solicit donations from you to their fake charity. While charitable donations are usually tax deductible, this is only the case for charities registered with the IRS as tax-exempt organizations. If you want to donate to a legitimate charity, websites like CharityWatch and Charity Navigator can help you vet organizations and make an informed decision. If you see a charity advertised online, scrutinize the website before donating. Is there contact information, a mission statement, information on who or what the charity supports? Scam charity websites are usually missing information.
“Ghost” Tax Preparers
A newer type of tax scam that is becoming more prevalent is the Ghost Tax Preparer. This is when scammers pose as tax preparers and offer to file your return, usually with a too-good-to-be-true offer such as a large refund. However, the Ghost Preparer won’t sign the tax return or include a preparer tax identification number (PTIN), both of which are required by law to submit your tax return. They may also charge you more for their services and can steal your personal information or your refund when all is said and done.
False Tax Filings with Your SSN
If a scammer steals your social security number, they can file a tax return in your name and have your refund sent to them. This type of tax fraud typically occurs earlier in tax season before the majority of people usually file. So, when you go to file your real tax return, you won’t be able to do so. This is why it's imperative to protect your SSN and personal information. Also, the earlier you can file your returns, the better to avoid this targeted scam.
“Overdue” Payment Imposters
This scam happens after you file and get your refund. Scammers pose as an IRS agent and claim you received a larger refund amount in error and now need to return the extra money. Of course, you can only pay back what you owe via wire transfer or gift card, and you have to do it now. Scammers will pressure you to send money while you’re on the phone with them and may threaten legal action if you don’t comply. However, the IRS initiates contact via official letter, and they don’t demand immediate payment or threaten retaliation.
Fake Tax Forms that Look Real
This is a newer tax season scam in which criminals modify the W-8BEN Form to obtain detailed personal information such as your mother’s maiden name, passport number, or account PIN numbers. The W-8BEN Form is a legitimate IRS form called Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding. This is a form filled out by people with U.S. bank accounts who are not U.S. citizens or nationals. So, scammers are targeting a vulnerable population who may not be able to detect the modified form as easily. Remember that the IRS will only contact you by official mail if you are required to submit additional forms.
Additional Resources for a Safe Tax Season
If you spot a tax scam or fall victim to one, you can find information on how to report it here. To protect yourself, remember that the IRS never contacts taxpayers by email, text, or social media message to ask for personal or financial information or demand immediate payment. Learn more about how the IRS contacts taxpayers here. On a related note, here are the questions your bank will never ask you. And you can stay on top of the latest consumer scams in Texas via the Attorney General’s website.
Meet our Wealth Management Team at Moody Bank!
Our Texas roots run deep, but we're proud to serve far beyond the Lone Star State. For nearly a century, we've offered personalized wealth management services to clients across the globe and right here in Southeast and Central Texas. Contact us with any questions you have about managing your finances and taxes.