The 2019 tax filing season is here, and as millions of Americans prepare to file their 2018 returns, the Internal Revenue Service (IRS) is reminding consumers to protect themselves against the many tax scams thieves often employ in an attempt to steal money and personal information from unsuspecting victims.
First, it is important to note some of the things the IRS doesn’t do when dealing with taxpayers. When requesting personal or financial information, the IRS does not initiate contact by email, text messages or through social media. (1) The IRS will never call a taxpayer and demand immediate payment using a specific payment method like a wire transfer, a prepaid debit card or gift card, and the IRS will not demand payments without giving the taxpayer an opportunity to question or appeal the amount owed. The IRS will not threaten to bring local police, immigration officers or other law enforcement to arrest individuals for not paying, and the agency cannot revoke a driver’s license, business licenses or an individual’s immigration status. (2) These types of threats are commonly used by scammers on their victims.
In most cases, the IRS will first attempt to contact the taxpayer by mail. For special circumstances, the IRS may visit a home or business, but the agency will generally first mail out notices to the taxpayer. If a taxpayer owes taxes, the IRS will instruct payment be made to the United States Treasury. Representatives from the IRS may visit taxpayers in person to collect tax debts, conduct audits or during criminal investigations, but in most cases, the IRS will initiate contact by way of mail.
The IRS also wants taxpayers to be on the lookout for dishonest tax return preparers who claim they can obtain inflated tax returns or promise larger refunds than their competitors. Consumers should be wary of using a tax preparer who boasts about providing returns that are substantially larger than the taxpayer received in previous years.
Tax preparers should be aware they could be targeted by criminals trying to steal client information. In many cases, these attacks are highly sophisticated, well-funded and technologically adept, and they are aimed at stealing client data, so the thieves can file fraudulent returns. (3) These criminals may use emails or phone calls to trick a tax preparer into giving up passwords and other confidential information.
Every year, the IRS releases a list of its “Dirty Dozen” tax scams taxpayers should be on the lookout for. The 2018 list includes many of the more well-known scams and several lesser-known crimes to be aware of. (4)
Phishing occurs when scammers send fake emails or create websites to steal personal information. Remember, the IRS will not initiate contact with taxpayers via email about a tax bill or refund. Criminals may also try to impersonate IRS agents through phone scams. The con artists who perpetrate these scams are known to use threats of arrest, deportation and license revocation.
To prevent identity theft, taxpayers should remain vigilant throughout the year to protect their passwords and personal information. Thieves will go to great lengths to try and steal personal information for a variety of nefarious purposes including filing fraudulent tax returns using someone else’s Social Security number.
Most tax preparers provide honest service, but taxpayers need to be aware of deceitful preparers. Return preparer fraud can include refund fraud, identity theft and other scams.
Many Americans donate to charitable causes and can deduct those donations come tax time. Contributors need to be aware of fake charities and perform their due diligence to ensure their donations go to legitimate organizations. Taxpayers should also be wary of abusive tax shelters to avoid paying taxes. If a certain tax shelter sounds too good to be true, it probably is.
Taxpayers should be suspicious of tax preparers who make inflated return claims. Some warning signs of these unscrupulous tax preparers include asking taxpayers to sign a blank return, promising a large return without looking at the taxpayer’s records and charging fees based on the size of the return.
Taxpayers should never make excessive claims for business credits. These could include the fuel tax credit and other credits that are generally not available to most taxpayers.
Falsely padding deductions on returns includes inflating deductions and expenses and improperly claiming tax credits to pay lower taxes or obtain a larger refund. Taxpayers are also advised to avoid falsifying income to claim credits, such as the Earned Income Tax Credit. The IRS advises taxpayers to always file the most accurate tax return possible.
There is a $5,000 penalty for filing frivolous tax arguments to avoid paying the appropriate taxes. These schemes often include making unreasonable and outlandish claims about the legality of paying taxes. Offshore tax avoidance, hiding income and assets in international accounts in other countries to avoid paying taxes, is in many cases illegal. The IRS wants to remind taxpayers that while there are legitimate reasons to maintain accounts overseas, taxpayers need to follow the proper reporting requirements when doing so.
To report a phone scam, call the Treasury Inspector General for Tax Administration at 1-800-366-4484 or visit https://www.treasury.gov/tigta/contact_report_scam.shtml. To report an unsolicited email claiming to be from the IRS, email email@example.com.