Beware Tax Scams

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As tax season continues, you are likely to find at least one tax scam. Indeed, tax scams are common this time of year, since many unscrupulous types are looking for ways to make a quick buck. Most of the tax scams that you are likely to fall victim to include those designed to get your personal financial information.

Giving out your personal financial information is something that should be done with extreme caution. Scammers play on your desire to get more money — and possibly get it fast. They try and set up situations in which it seems to make sense to provide personal financial information. Of course, once you have done that, these fraudsters can open new credit cards in your name, or even raid your bank account. Here are some common tax scams that you might see this tax season:

IRS Phishing Scams

One of the most common scams involves phishing. You receive an email telling you that there was an error, and you have a little more money coming to you. A variation plays on fears, telling you that there was a mistake with your e-file, and that you need to fix it immediately. No matter the reason, though, the scammers send an email that looks official.

You reply with personal information, or you click on a link that takes you to an official looking site — but that isn’t the real thing. You provide your information, including Social Security Number, name and address. In the case of the phony refund, you might even be asked for your bank account number.

The best way to avoid this scam is to send any email from the IRS right to the trash. This is because the IRS won’t contact you via email asking for additional information.

Grant Tax Scams

Some scammers contact you (phone or email), telling you that your timely filing of your tax return has entitled you to a special grant or special refund. This can be a smaller amount, such as $1,000 or $5,000. This makes the scam seem more reasonable. Other scammers tell you that you are eligible for $10,000. But hurry! This is only available for a limited time. You give your bank account number and routing number for the “direct deposit” only to find that a debit has been made instead. Don’t fall for this. Your good credit, or your tax return status, won’t qualify you for government grants. You have to apply for those.

Tax Preparer Fraud

Do you trust your tax preparer? Some fraudsters set up as accountants or tax preparers. When you use a tax preparer, you offer a great deal of information, from your Social Security Number to bank accounts for direct deposit of your tax refund. In some cases, you will get your tax refund — just as promised. This is a good way for you to let your guard down. However, since the false accountant has your information, it is possible for him or her to open credit cards and take out other loans in your name.

You want to make sure that you properly vet your tax preparer before handing over your information. The National Association of Enrolled Agents can help you find properly approved tax preparers. You can also find accredited CPAs that are also personal financial specialists at the American Institute of CPAs.

What tax scams have you seen?

{ 12 comments, please add your thoughts now! }

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12 Responses to “Beware Tax Scams”

  1. Amy Saves says:

    So many scammers out there! Why can’t people just be honest? Good article. Yeah, the IRS would never contact you by email. They are way too busy for that.

  2. Hunter says:

    Thanks Miranda. Lots of important issues here: Phishing is ugly, but pharming is just as bad. Fake websites that replicate ligit ones and take your info are difficult to spot. Surprisingly, internet based identity theft scamsaccount for only 10-15% of al identity theft. I did a piece on this on Mar. 18.

    Another biggie is instant refunds. Most people really don’t need to get their refund 10 days early, especially if they were aware of the real interest rate on this advance.

    So many scammers.

  3. mannymacho says:

    Sometimes instead of setting up a real-looking site, the emails will trick you into downloading a pdf that is full of malware, sets up a keylogger on your machine, and the rest is history…

    • Miranda says:

      Great point! Thanks for sharing your warning about malware PDfs. You really do have to be careful about what you open anymore.

  4. zapeta says:

    Thanks for the tips! I think a lot of people are nervous about their taxes anyway and this makes them more vulnerable to scams.

  5. Shirley says:

    Many people do not realize that you can highlight (NOT click on!) a link anywhere and choose ‘copy shortcut’ from the right-click menu. Paste that into notepad or any text editor and you will see the actual link address.

  6. mikestreb says:

    Your tax preparer doesn’t have to be a CPA or EA to be trustworthy. There are plenty good plain old paid tax preparers (there are also plenty of scumbags out there too). Just do your homework!

    • mikestreb says:

      Hell, I have a brother who is a CPA who asks me tax questions all the time!!!

      • Strebkr says:

        Yes, I am a CPA and yes I do ask you questions all the time. But thats because you own a tax prep business. I don’t do taxes for a living.

        Did you do your own taxes yet?

        • Shirley says:

          I’ll bet you are both laughing now! 🙂

          • Strebkr says:

            It is kind of funny that we both read and comment on the same articles from time to time. Jim thinks we might be the his first family to be on the blog like we are. My wife reads, but she doesn’t comment much if any.

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