Aug 14

Tips for Taxpayers to Recognize Tax Scams

Every individual should be on the lookout for financial scams of any type, as they are clearly prevalent in contemporary society. Unscrupulous actors like to develop schemes that sound valid in presentation, but are actually just fronts for theft and other forms of deception intended to steal assets from an unsuspecting victim who does not recognize and understand their tactics.

The actors have no problem even imitating government agencies such as the Internal Revenue Service if they can con anyone into believing their deception and gain access to money. The goal is to steal anything that can be stolen, ranging from financial assets to personal identification information that can be used to fraud other individuals or businesses. This kind of illegal activity is more common than most people realize, and it is always a good decision to take some time to learn how to spot these criminals. Here are a few reminders regarding IRS tax scams.

Phone Contact Policy

Many of us have received a phone call where the person claims to be from the IRS or the Department of Justice and you need to immediately pay up or they will be at your door to make an arrest. The IRS rarely contacts a taxpayer by telephone. It can happen, but not by standard policy. Instead, the IRS will send a contact letter first, also known as a “notice letter,” and it will typically inform the taxpayer of issues with their tax account or tax return.

In addition, the IRS never sends emails or text messages. When the IRS does call, it is typically a courtesy call of sorts, and they will never demand immediate delinquent payments. In fact, IRS agents CANNOT take payment over the phone. Any payment to the IRS must be mailed to the address provided by the Service. IRS notifications are formal and all taxpayers have rights to challenge issues with their account and to appeal decisions made by the IRS or to the US Tax Court. In fact, the IRS has a “Taxpayer Bill of Rights” ( known as Publication 1) that can be downloaded here. The service often includes this publication when mailing taxpayers notices on changes to your account, request for audit, demands for payment, and intent to levy or lien the taxpayer.

“Phishing” Scams

Another problem is receiving an email contact from a fake IRS agent or tax preparer. This is also referred to as a “phishing” scam. The sender requests specific sensitive information such as your social security number, bank account number, credit card information and so on. The sender’s intent is to use this information for illegal purposes. Even opening the email or clicking on any hyperlinked website in the email could trigger a malware program that will scour your computer for any exposed identification information, including passwords to financial accounts in some instances.

These scams can actually be more problematic than fake preparer claims or demands for immediate payments. The damage that can be done to the victim and their financial status can be extensive, including credit rating damage, embezzlement of personal assets, and ongoing identity theft as the culprit acts continually in assuming the victim’s identity. This can actually happen in a variety of ways, and it is always a good personal practice to mark spam in your email accounts and dump the notices daily because of potential malware concerns.

Scams Happen Throughout the Year

Tax scams are not necessarily season-specific, although the typical taxpayer associates taxes with the first part of the year. Many business operators pay taxes quarterly and are in regular contact with the IRS. Be aware of this activity at any point in time, and never provide any information without documented validation from the contacting party. The best response is to hang up on the caller and contact the local police department immediately, including if the caller claims to be a tax advocacy group requesting pertinent personal information such as a Social Security number. In addition, the IRS aims to inform taxpayers about these scams and contains many resources on its website.

Never Respond to a “Ghost” Preparer Contact

Some telephone contacts regarding IRS claims are conducted by fake tax preparers. They may sound nice at first, but the ultimate goal is often to secure personal information that can be used for various nefarious activities. The pattern for the ghost preparer is to not sign the return, making it appear the taxpayer has prepared the document personally, and then charge an upfront fee for the preparation the preparer refuses to sign. All certified tax preparers are issued official identification numbers, also known as a TPIN, and all prepared returns must be signed by the preparer and their TPIN number included on the form EVEN IF YOU DO NOT PAY FOR THE SERVICE.

Fake tax preparers often:

  • Charge a fee with no receipt
  • Enter false information to increase a tax return value
  • Divert direct deposits to a personal account

This could result in the taxpayer being responsible for a false tax filing as well as being swindled out of any valid tax return, leaving the “ghost” preparer with the assets and no valid form of identification associated with the case. Hang up anytime a tax preparer calls unsolicited and then call the authorities immediately, including filing an IRS ghost tax preparer report Form 14157. The government takes these claims very seriously, and they welcome your help in stopping this practice.

Contact the IRS Following Suspicious Activity

It is always good to understand and follow the requested protocol when being targeted for a tax scam. The Internal Revenue Service suggests:

  • Hang up immediately after recording the caller ID number
  • Report any information to the Tax Inspector General at the IRS
  • Report the incident additionally to the Federal Trade Commission

Contacted individuals should also remember to review their tax account at IRS.gov and call the agency at 800-829-1040 when any discrepancy is found. Always remember that the IRS has a specific protocol when tax collections could be an issue, and it is a legal process that allows all taxpayers an opportunity to appeal any delinquent tax notification or assessment. The government understands that mistakes are made from time to time, and they actually want the record straight as much as the taxpayer.

And always remember to share your experience on social media platforms to help prevent this activity from being extended to other victims. For more tips on dealing with tax scams, visit this IRS tip page and always be on the lookout for tax scams. Also, remember to NEVER email your personal identification information. Email is not secure and should never contain social security numbers, bank account numbers, credit card numbers, driver’s license numbers and so on.

Disclaimer: This is intended to provide useful tips and is NOT intended to be legal advice. You should always seek the advice of an attorney when creating a will. You can also get more information about creating a will by contacting one of the attorneys at Brunsdon Law Firm.

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