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Don’t Fall Prey to Popular Income Tax Scams in 2017

Sadly, tax scams are a never-ending problem, and each year, we see a new crop emerge. While tactics may differ from one scam to another, each uses deception to try and separate you from your money—and in doing so, cause significant financial and personal harm.

The IRS releases its “Dirty Dozen” scams to alert taxpayers each February so that people do not become victims of income tax fraud. This blog is focused on three current scams that many people fall victim to—especially at this time of the year.

When we compared the 2017 list to the 2016 list, we saw many repeat scams. Despite efforts to warn people through social media and other channels, three scams in particular remain extremely prevalent. Sadly, naïve and unsuspecting taxpayers fall victim to them every day.

The Most Common and Worst Income Tax Season Scams for 2017 Are:

  • Email Phishing Scams
  • Telephone IRS Agent Impersonations
  • Unscrupulous/Fraudulent Tax Preparers

Like many scams, the objective of these particular scams is to obtain the victim’s personal information (e.g., name, address, Social Security number, credit card information, passwords, date of birth) so that the perpetrators can commit an array of financial crimes—primarily credit card fraud and income tax refund fraud. In other instances, they aggressively threaten victims in an effort to coerce them into making an immediate payment to them.

Below is a description of each of the three prevalent 2017 scams.

 

Email Phishing Scams

Traditionally, phishing scams target the filing public.

Recently, though, there have been reports of phishing scams that are now trying to dupe income tax professionals, payroll processors, human relations professionals, and other workers who manage employee information.

In these cases, fraudsters attempt to mask their identity in order to make it appear that the email (and corresponding link) is being sent from an acknowledged and trusted source such as a co-worker, advisor or business associate. If you receive an email like this and choose to question it, you should call the sender at a phone number you have for them in order to verify that they actually sent the email (or didn’t) before releasing any data.

The IRS does not send emails or texts, or communicate via social media. Furthermore, it does not ask for any immediate payment via wire transfer, credit or debit card advance, prepaid credit card, cash, iTunes card, or gift card.

Do not open or click on any links in an email allegedly from the IRS.

Simply opening or clicking on a link could infect your computer with a virus or unknowingly allow malware to be placed on your computer.

 

Telephone Scams

Criminals impersonating IRS agents once again pose a daily threat to taxpayers. I received two such calls the other day! As much as we all claim we will never fall for such a scam, they in fact happen all the time, and they cost Americans millions of dollars in financial losses.

In the 2017 IRS telephone scam, much like IRS telephone scams from previous years, the scammer will use a phony name, title, and badge number in order to present a convincing first impression. Don’t buy it!

In these scams, the criminal seeks money in the form of an immediate cash payment, wire transfer, credit card or debit card advance— or even a gift card. The aggressive and phony threats include imprisonment; police arrest at your place of employment or at your residence in front of family; deportation; and even revocation of your driver’s license. Some scams even go so far as to try to convince taxpayers that they are entitled to a sizeable refund of which they weren’t previously aware.

Fact:

The IRS will never call you, me or anyone and demand a specific type of payment; nor will IRS representatives ever ask for your credit card numbers. Additionally, the IRS does not place automated collection calls. The IRS always will send a bill in the regular mail. The IRS will never threaten to arrest anyone utilizing local law enforcement. Remember: Taxpayers have rights—and those include appeal rights.

If you receive a phone call that sounds similar to what I just described, hang up. Never give out any information, including your Social Security number.

 

Unscrupulous/Fraudulent Income Tax Preparers

Sixty percent of taxpayers use an outside source to prepare their income tax returns.

Do you know who is preparing your income tax returns? Are they reputable? Were they referred to you by a trusted source? Are they a Certified Public Accountant (CPA)? Have you checked and verified that they in fact are a licensed and active CPA? How long have they been practicing in that same location? Like in any industry, there are bad apples in every bunch. Income tax preparation is no exception..

If your tax preparer resides in the once-vacant retail space that just opened prior to tax season, (think seasonal Halloween stores), how does that make you feel as a customer? Queasy, perhaps?

Chances are good this is a scam.

In this case, dishonest people will attempt to prepare income tax returns; yet they are more concerned about stealing your identity rather than actually preparing your income tax return. Similarly, they will attempt to convince an unsuspecting taxpayer that they are entitled to a large refund, and then they will prepare such a return in exchange for a percentage of the refund. In some of these cases, the taxpayer’s address (or bank account) may even be the address (or bank account) of the tax preparer, which enables them to take their “percentage cut” and then issue you a check for the remainder.

The downsides here are numerous, including criminal penalties, interest, criminal prosecution, and lots of unexpected stress and wasted time. Additionally, these scammers now have your personal information, which is all they need to commit more crimes involving identity theft or income tax refund fraud.

What to do? Never work with a tax preparer who bases his/her fee on the amount of the refund, or who promises you a bigger refund than the tax professional you may have previously been using. Never give your source documents (W-2s and1099s) to a preparer until you have actually done your due diligence on them and subsequently retained them.

Any taxpayer who signs his/her return is responsible for the contents therein. Yes, there are income tax preparer penalties; but at the end of the day, it’s your income tax return, not the preparer’s.

Do you have questions about income tax scams? If so, please contact us here.

BIZ TIP TOPIC EXPERT: MARTY MATHIAS

MARTY MATHIAS

Marty is a Principal and a member of Business Advisory Services at SVA Certified Public Accountants, S.C. Marty has over twelve years experience working with closely-held business and individual clients. His specialties include performing assurance services (audits, reviews, etc.), mergers and acquisitions services, general business consulting, as well as fraud and litigation support services.

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