Common Tax Scams and How to Avoid Them This Tax Season

Although we may be an independent insurance agency, the folks at Magruder also feel a responsibility towards our clients and community to provide them with important information—like tax scams that will be on the rise the next few months. Now that W-2s have been sent and everyone has started to file, you may be targeted by scammers, or hear about it from others. It’s important to stay vigilant, so read through our following article on the popular methods scammers use, and how not to fall victim to them.

Common Tax Scams and How to Avoid Them This Tax Season

We’ve all got them before—the fake phone calls and fake emails sent out by scammers trying to take your money. And unfortunately, thousands of people fall victim to these scams every year. In 2020, the IRS stopped close to 5.2 million fraudulent tax refunds from being paid—nearly twice as much from 2019.

Here are a few of those scams that you need to look out for:

  • Identity theft – This is at the top of the list. This occurs when someone else takes on your identity by using your private identification information (like your Social Security Number, credit, or banking information, and even your address) for the purposes of their financial gain.
  • Phishing – This is a type of email scam that lures people in to gain access to their personal and financial information. It is usually through a seemingly “legitimate” email or fake website. Once information is obtained, identify and financial theft becomes possible.
  • Return preparer fraud – This involves the preparation and filing of false income tax returns. The person preparing the return may claim inflated expenses, false deductions, or excessive exemptions. In worst case scenarios, scammers obtain your information and file as if they were you, only they receive your tax return.

How Can You Protect Yourself Form Common Tax Scams?

1) Consider any related phone calls as suspicious:

If anyone calls you claiming to be the IRS or claiming to deal with income tax, treat it as a suspicious phone call. Be prepared because scammers are very good at what they do. In many cases, they may know a lot of personal information about you. Using your personal information is one method they use to draw people into their scams. Keep in mind that the IRS will always contact you by mail before ever contacting you by phone. So if you have received no mail, chances are it is not the real IRS calling you. If you are unsure, ask the person on the phone for their name, badge number, and callback number. Never provide them with any personal information until you call the IRS directly and verify that it was them calling.

When accepting phone calls, you should also keep these considerations in mind—The IRS will never:

  • Call you or email you without notifying you by mail first
  • Threaten to have you arrested
  • Demand immediate payments
  • Demand payments over the phone
  • Ask for personal information over email, text, or social media platforms

2) Never open emails from unknown sources

If you see an email address that you do not recognize or that looks suspicious, do not open it. Remember, the IRS will never contact you through email without first sending you mail. Besides emails from the “IRS”, phishing scams can also be disguised as free tax advice or preparation services. If you see any emails with subjects of this nature, delete them immediately.

In addition, if you receive any emails from friends or family members with external links, don’t click on them until you have verified that they are legitimately from a family member. Scammers can gain access to friends' and relatives' accounts and send you emails disguised as them. Links included within such emails could be used to obtain your personal and financial information. If unsure, just ask first.

3) File your return early

The earlier you file your return, the less time an identity thief will have to do it.

4) Select strong passwords for all of your accounts

The internet can be a wonderful place, but it also opens up scammers to a whole new world of information. When choosing passwords for online accounts, choose a strong and unique password. You should never use passwords like your child’s or spouse's name–they are too easy to guess. Choosing strong passwords will help to safeguard your online information. Another suggestion would be to change your passwords regularly–once a month, if possible. In addition, don’t use the same password for all accounts. Make sure each account has its own unique password. This way, if someone gains access to one account, they won’t have access to another.

5) Review your return before filing

Always remember that regardless of who prepared your tax form, you are responsible for the information within it. Filing false or inflated incomes or expenses is a criminal offense, and scammers do it to their victims often. To avoid this, do a thorough check of your return before filing it. Also, be sure that the person preparing your tax forms sign the return they prepare for you. Double check to make sure that they have signed their IRS ID number before submitting your form.

There are many tax scams out there, but if you are vigilant, you won’t to fall victim. Always take extra precautions when it comes to phone and email and never give out any personal information without directly contacting the IRS first.

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