Although tax scams occur all year long, Sixty-one percent of the tax frauds that were discovered in the first four months of the previous year were reported to the Better Business Bureau’s Scam Tracker.
Additionally, people are more likely to fall victim to financial scams.
Per the Federal Trade Commission’s 2019 Consumer Sentinel Network data, approximately one in three Americans aged 20 to 29 reported losing money due to fraud in the previous year. Of those 70 to 79, just roughly 13% reported fraud losses. The IRS reports that since 2013, victims of tax frauds have lost over $23 million.
Identity theft is the form of fraud that is most frequently reported. Over 650,000 individual reports of identity theft were filed with the FTC last year. This kind of fraud frequently happens after tax schemes.
Here are four tax-related scams that are most likely to occur, along with tips on how to avoid becoming a victim of them.
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Fake tax preparers
There are some dishonest tax specialists, but for the most part, they are trustworthy and offer good services. These people can perpetrate scams in a number of ways. Occasionally, dishonest tax preparers would fabricate information on returns to increase the amount of the refund; other times, they will try to steal personal data contained in tax records.
2.Phishing
Phishing is a year-round practice that involves utilizing phony emails, adverts, or websites to get personal information. Hackers typically send what is known as a “phishing email,” which is an email that imitates a friend, business, or store and contains a link to a phony portal that requests personal information.
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Phone scams
Phone scams, which are arguably the most common type of tax scam, include crooks posing as IRS agents calling you and threatening to jail or deport you if you don’t pay a tax payment that is allegedly past due. Since they “remain an ongoing threat to taxpayers,” the IRS said.
In order to make their calls appear more genuine, scammers “spoofed” the IRS Taxpayer Advocate Service office’s phone line last year. The fraudulent calls appeared on caller ID as the IRS. However, bear in mind that the IRS would never contact to request that wire transfers, prepaid debit cards, or gift cards be used for prompt payment. The IRS will usually mail you a bill first if you actually owe money.
4.Identity theft in taxes
This usually occurs when an identity theft victim utilizes your data to obtain an IRS refund prior to you filing your taxes. Usually early in the tax season, the thieves obtain your Social Security number and personal information in order to file a false tax return. Information about a deceased taxpayer may occasionally be used by scammers to attempt to obtain a refund.
A form of this might also occur if someone works without paying taxes using your Social Security number. In a recent tax fraud webinar, Lisa Schifferle, an attorney with the Federal Trade Commission, pointed out that claiming your children as dependents is another frequent way identity theft occurs during tax season.
How to guard against fraudulent tax
There are numerous actions you can take to safeguard your information and prevent being a victim of tax scams. However, not everyone has the patience or the time to take things too far. These simple self-defense techniques should dispel most typical threats.
1. File early
Make it a priority to file your tax returns as soon as you can if you haven’t already. Go ahead and file as soon as you can in the future. there is a degree of “first come, first served” in the tax filing procedure. You can outwit the criminals if you file early.
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Make sure you keep your social security number safe
The chief operating officer of the Identity Theft Resource Center, stated at a recent webinar on tax frauds that a large portion of identity theft is low-tech. “It all starts with someone obtaining your Social Security number,” he states, noting that it might be as easy as misplacing your wallet or smartphone, which include data that could be of interest to a data thief.
locking your smartphone and leaving any papers with your Social Security number at home. Don’t load critical data onto your devices if at all feasible.
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Keep your filing safe
Prevent identity thieves from getting their hands on your tax forms. If you file online, file using a secure connection — don’t file your taxes using public Wi-Fi. Bring your taxes to the post office and mail them there if you are filing on paper. In this manner, your tax forms, which contain a lot of personal information, won’t be stolen from your mailbox. Regretfully, there have been instances where tax forms have been taken straight from private mailboxes by burglars.
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Be conscious of data breaches
Data breaches are a major source of information that persons require to carry out or initiate tax identity theft. Cybercriminals frequently use phishing attacks—which can involve more than simply a bogus email—to target you in order to obtain further information, even if they only have a little amount of it.
Make sure you take the necessary precautions to secure your information when a data breach is reported, such as changing your passwords, keeping an eye on your credit reports, and practicing good cyber hygiene.
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Look out for warnings
Tax identity theft is more likely to occur if your Social Security number has ever been misplaced, stolen, or compromised. Consider it a warning sign, report it, and refrain from providing the sender with any information if you come across any of the following:
a) You allegedly receive correspondence from the IRS over an unfiled tax return.
b) A duplicate Social Security number prevents you from electronically filing your tax return.
C) You receive notice that someone has opened an online IRS account in your name or that someone has accessed or disabled your current account because you did nothing.
d) You receive a notification stating that wages from an employer you did not work for are shown in IRS records.
It is important to remember that the IRS does not approach individuals via social media, text messaging, or email in order to obtain financial or personal information. In most cases, they will get in touch with you via letter first if they need to.
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Make sure you close your credit temporarily
Anyone attempting to obtain a credit card or loan in your name will be prevented by placing a freeze on your credit reports. It’s also free to do. Identity monitoring alerts you when a new account has been opened using your personal information, but it is too little, too late. Putting a freeze on your credit will stop fraudsters from obtaining it in the first place.
Freezes should also be placed on any minors or youngsters living in your home. To obtain this freeze, you must individually contact each of the three major credit bureaus—Equifax, Experian, and TransUnion. Usually, you’ll have to present a copy of the child’s Social Security card or birth certificate in addition to proving your identity.
