Tax & Accounting News

As Tax Day Approaches, So Do Tax Scams That Want to Do You Harm

by
Lee Reams II
on
1/25/2017
As Tax Day Approaches, So Do Tax Scams That Want to Do You Harm

Tax day is right around the corner, which can mean only one thing: the incredible wave of tax-related scams targeting the hardworking men and women of the United States is about to come along with it. According to Forbes and the Internal Revenue Service, tax-refund fraud in particular is on the rise. After costing taxpayers an estimated $6.5 billion in 2014, that number was predicted to rise to a disheartening $21 billion by the end of 2016. Though every culprit in an abusive tax scam who is arrested, tried, and sentenced serves an estimated 25 months in prison according to the IRS, that doesn't mean there aren't many more like them willing to step up and take their place.

Staying safe from tax scams doesn't just mean protecting your refund - it also helps you protect your identity, as well. If you truly want to stay as safe as you can before, during, and after tax season, there are a few key things you'll want to watch out for.

The Fake IRS Letter

One of the most common tax-related scams of the modern era is also one of the most old-fashioned. Victims will receive a letter in the mail, claiming to be from the IRS, with a specific demand usually related to money. These letters usually make people think that they ARE in serious trouble with the IRS or are about to be, but all of it can be avoided if they pay up or provide specific documents.

Asriel Acosta of Acosta Accounting Services said that "I had a couple clients call me [about a fake IRS letter] and I had them send me pictures." Asriel said that there were "subtle differences which show they are fake," but that your average person can't be expected to know this type of fine detail - especially in such a stressful situation. Asriel would go on to say that "Criminals are getting smarter and thankfully through social media, we can stay connected and up to date on their latest scams."

Here is a sample fake IRS CP-2000 supplied by Iowa State University.

The Malicious Tax Preparer

Another common scam takes the form of someone who claims to be able to do your taxes for you - something millions of Americans do each year, but they are really just positioning themselves to rip you off. Cliff Davis of Davis & Langford CPA's said that the worst scam he had personally run into was one where "an unscrupulous tax preparer prepared false and misleading returns for thousands of people in Georgia. The preparer claimed deductions and amounts that were totally unsupported according to the Department of Revenue. Thousands of taxpayers are receiving assessment letters questioning amounts."

Davis warned that the number one way to avoid this type of situation is to be as proactive about it as possible. He said that the "golden rule" in terms of third party tax preparation services is "you should not sign a return when you do not understand what is in it."

Alfred White, from The White House Business Solutions, warns that "going to someone who guarantees a certain amount of tax refund without even looking at your paper work or W2's is a definite red flag."

The IRS Scam Phone Call

Joshua Standley, from DKK Accounting LLC, says "phone scams seem to be the worst. The IRS does not call you." Many students and even elderly fall for the IRS phone scam call. Patricia McMillan, from McMillan Consulting LLC shared, "a client revealed that she sent money to an individual, posing as an IRS agent. The individual had told her that she owed the IRS back taxes and had to pay immediately."

The IRS has a system in place when it comes to collecting debts. It does not initiate this process from a phone call demanding immediate payment. That is a huge red flag. While enforcement has improved, including a recent call ring being shut down in India, many US taxpayers are still becoming victims.

Christi Bender, CPA, had the following happen to an unsuspecting couple. "I had a client meet a stranger in a parking lot after receiving a scam call that they had to bring $3,000 in cash to meet an IRS agent or their home would be foreclosed upon immediately. They were essentially robbed in that parking lot. The worst part is that they now feel foolish. Even months later, they are living with the shame of having given so much of their hard earned money to a stranger because they were so gullible. This has affected their self esteem, marriage and confidence."

Combating Identity Theft

As stated, the number one goal of tax scams is not usually JUST to steal your refund - this happens to be a "happy side effect." Instead, most people who are looking to scam the general public are looking to steal their identities - something that allows them to do a huge amount of damage before they're eventually caught, IF they're eventually caught.

Gerri Lazarre of TriMergeTax said that "tax related identity theft is probably one of the worst tax scams affecting the nation. Once revealed, you find out that someone has stolen your identity, has access to your personal and private information, and you were not aware."

She said that through her own experience, she often encountered clients who had not filed for multiple years - allowing the identity thieves to go unnoticed for that entire time. She said that "one of the tools to combat tax identity theft is to file annually and timely."

share this post
Search for matches...
Lee Reams II

Lee Reams II

CEO

I am a tax and business news junkie who has spent the last 20 years developing and executing "best in class" word-of-mouth marketing campaigns for tax and accounting professionals. With TaxBuzz and CountingWorks we have taken that same commitment to quality content directly to the consumer. Keeping you up-to-date with the latest tax law changes, business growth tips and planning strategies to help you reach your best financial outcome.

Recommended Professionals

In the face of economic uncertainty, TaxBuzz is the industry's most up-to-date tax information.

Join 60,000 who get our weekly newsletter. No spam.

Need help selecting a firm?

Use our specialized search engine and get matched to the best accounting and tax firm for your needs.

Related Posts

Latest Posts