2017 proved to be a hard-working year for most Americans with many working more than one jobs. Although the numbers are not out yet and will not be disclosed by the U.S. Census until September 2018, we can expect income growth in all categories (per capita, family and household), as it has been the trend for the past three years.
As we gaze in this realization, we are forced to do a quick reality check to make sense of how we spent our money, how much of it we put aside for savings, and how much we owe Uncle Sam. Keep in mind that no matter what the outcome is, we have to be aware of tax season scams. Predators and unscrupulous individuals are out there looking to entice you for your hard-earned money as you try to figure out how to keep more of it and pay less taxes.
Here are some unfortunate scams used to get your money:
1. The Early Refund Promise Scam: Phishing
Phishing is the most common tactic scammers use to con taxpayers. Phishing uses e-mail or text messages to trick you into providing your Social Security number, bank account numbers and passwords. A phishing e-mail or text may provide a link to a website that looks official but isn’t. It may offer a larger refund for a quick reply, or claim that your tax return is missing important information, such as your W2 wage and tax statement from your employer. These scams may even threaten penalties or criminal prosecution if you don’t act quickly.
Don’t fall for this con! Don’t click any attachments or links from any suspicious e-mail or texts!
The IRS will never send unsolicited messages to taxpayers and it doesn’t ask for passwords, PINs or other personal information. Forward messages of this kind to firstname.lastname@example.org , then delete them immediately. Through phishing, these scammers get your personal information and passwords, which will allow them to steal your identity and take over your account because a lot of confidential data is gathered during the tax filing process which can pose a great risk to your finances.
2. The Unscrupulous Tax Preparer
Before you contact someone to prepare your tax return, do your homework and choose wisely. You’ll be sharing your personal information with the tax preparer, so make the choice after much research. A bad tax preparer may take some of your refund, overcharge you or find other underhanded ways to steal your cash.
Consider trusted resources, like friends, family members and the Better Business Bureau, DCA (Department of Consumer Affairs) and other consumer-oriented websites can help you find a reputable tax preparer. Also check the IRS website’s “tips for choosing a trustworthy tax preparer”.
Ask the tax preparer to disclose all fees up front, preferably in writing. A tactic employed by a shady tax preparer is the charge of a high fee, then withhold your tax return until this fee is paid. Before paying fees or signing documents, be sure you read and understand all forms from the tax preparer. Be sure to check the preparer tax ID number since all preparers are required to have one to can file your tax return electronically.
The taxpayer is legally responsible for his/her tax return even if it was prepared by another person!
3. Quick Debt Cancellation Scams
The possibility of a cheap, quick fix without financial consequences sounds very attractive but very unlikely. Scammers prey on financially stressed taxpayers, like homeowners, affected by the housing crisis and may be facing foreclosure are usually targeted via phishing. Some tricks are: “Remove IRS Tax Penalties or Cut Your Debt Today or Pay Only 1% of Your Tax Bill”, among others. Sounds attractive. All frauds!
Ignore these scams. If taxes are specifically mentioned in the scam, there are legal ramifications for the perpetrators. No matter what the offer, don’t give up your personal information.
If it sounds too good to be true, it probably is!
4. The Phony Charity
The current reality is that scammers will use natural disasters (Hurricanes, floods, earthquakes etc.) and national tragedies to collect fast cash for phony charities. During tax season, scammers will claim that a donation you make now will allow you to get a tax deduction for the previous year. Not true!
Charitable contributions are taken in the tax year they are made! Do not donate to door-to-door collectors or over the phone, unless you initiated the transaction.
5. Offshore Tax Shelters That are Non-existent
Beware of scammers who are trying to convince Americans into transferring money or making investments to offshore accounts as tax shelters to avoid paying taxes. Offshore accounts are legal but must be disclosed to the IRS during tax time and failing to do so can lead to criminal prosecution.
Don’t respond to e-mail requests to open an offshore account, however, if you already have one, make sure it’s properly declared, and all related taxes are paid.
The IRS’ Offshore Voluntary Disclosure Program offers taxpayers who admit to maintaining offshore accounts the opportunity to become current with their tax returns.
Denise Garrett is a financial counselor at the LDCENY and has more than 25 years experience in financial counseling and retail banking.