Yahoo Finance 4 Tax Scams to Watch Out For
Tax scams occur throughout the year, but they reach their peak during tax season. Taxpayers must be careful to avoid these scams, which can lead to significant penalties and interest--and even possible criminal prosecution. The IRS has released a list of some of the most common tax scams to help taxpayers know how to spot them.
Identity Theft
Identity theft cases are among the most complex ones the IRS handles. Identity thieves are increasingly looking for ways to use a legitimate taxpayer's identity and personal information to file a tax return and claim a fraudulent refund. A victim's first tip-off may be an IRS notice informing the taxpayer that more than one return was filed in his or her name or that the taxpayer received wages from an unknown employer. You must protect your personal information to keep scammers from filing a fraudulent tax return using your identity. If you belive that your personal information has been stolen and used for tax purposes, you should immediately contact the IRS Identity Protection Specialized Unit. For more information, visit the special identity theft page at www.IRS.gov/identitytheft.
Phishing
Phishing is a scam typically carried out with unsolicited email or a fake website that poses as a legitimate site to lure in potential victims and prompt them to provide valuable personal and financial information. Armed with this information, a criminal can commit identity theft or financial theft.
If you receive an unsolicited email that appears to be from either the IRS or an organization closely linked to the IRS, such as the Electronic Federal Tax Payment System (EFTPS), report it by sending it to phishing@irs.gov.
Keep in mind the IRS does not initiate contact with taxpayers by email to request personal or financial information. This includes any type of electronic communication, such as text messages and social media channels. The IRS has information that can help you protect yourself from email scams.
"Free Money" from the IRS
Flyers and advertisements for free money from the IRS suggesting that the taxpayer can file a tax return with little or no documentation have been appearing in community churches throughout the country. These schemes are also often spread by word-of-mouth as unsuspecting and well-intentioned people tell their friends and relatives.
Scammers prey on low-income individuals and the elderly. They build false hopes and charge people good money for bad advice. In the end, the victims discover their claims are rejected. Meanwhile, the promoters are long gone. The IRS warns all taxpayers to remain vigilant.
Tax Scams Involving Social Security
There are a number of tax scams involving Social Security. For example, scammers have been known to lure the unsuspecting with promises of nonexistent Social Security refunds or rebates. In another situation, a taxpayer may really be due a credit or refund, but uses inflated information to complete the return. Beware. Intentional mistakes of this kind can result in a $5,000 penalty.
You can visit the IRS website to find out more information about these tax scams and others. A little diligence on your part could save you big money by helping you avoid falling victim to a tax scam.
Andy Hough writes about frugality and living well on a small income at TightFistedMiser.com.
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