Many of us dread the thought of tax season, but others look forward to this time of year, especially the tax cons. Each year the IRS publishes a list of its Dirty Dozen tax scams. As tax season heats up, I want to focus on a few of the more common scams I've come across and offer some simple tips.
Identity Theft: Tax identity theft continues to be one of the worst tax scams out there, and tax season is generally when the thieves are most active. With today's technology tax cons use various ways to get their hands on taxpayers' personal information. The victimized taxpayer often doesn't realize there's a problem until he files his return and gets an IRS letter advising that more than one return was filed in his or her name. Tax Tip: File your return early and make sure to safeguard all personal information. If you discover or fear you are a victim of identity theft, contact the IRS Identity Protection Specialized Unit at 800-908-4490.
Phone Scams: Phone scams come in many variations, but the most common one I've seen involves IRS imposters (often with foreign accents) threatening arrest or jail time if payment isn't made immediately. You should know that the IRS usually starts collection by U.S. mail, and never demands immediate payment by phone. Tax Tip: If you receive a threatening phone call from the IRS demanding money immediately, hang up! You can report these scam calls to TIGTA through its website or call 800-366-4484.
Return Preparer Fraud: Be wary of return preparers who promise large refunds, don't have a PTIN or fail to put his or her signature on your return. The IRS and LDR are cracking down on fraudulent preparers, but it's too late for the taxpayer once the preparer is caught. The agencies often obtain names of taxpayers who used the fraudulent preparers and review those returns which often times result in additional taxes and large penalties and interest. Ultimately, you're responsible for the information reported on your tax return so review it closely before signing and filing it. Tax Tip: Choose your tax pro carefully.
Additional information about these tax scams as well as other common tax scams can be found on the IRS website.