Taxes are confusing for everyone, especially young professionals who don’t have much experience filing. Unfortunately, there are people out there who prey on this confusion with a number of tax scams.
You really need to be careful because if you fall for a scam, criminals can take your money, steal your identity, or even get you in trouble with the law. Here are the four of the sneakiest tax scams in 2015 targeting millennials and ways you can avoid getting conned.
Scam 1 – Phone scams
People are scared of the IRS. It’s a frightening thought to think that you messed up your tax return. Criminals are well aware of this fear and use it to run phone scams. They call up people and tell them there’s a problem with their taxes. The criminals might ask for personal information like your Social Security number or tell you that you still owe taxes and will demand immediate payment, usually asking for a money order or prepaid debit card.
Scammers are sneaky and have all kinds of tricks to seem believable. They can use a fake caller ID that shows up like the IRS, use fake names and IRS badges to impersonate IRS agents, and even have noise in the background to make it seem like a real IRS call center. A scare tactic involvees threats to revoke your driver’s license or send you to jail. In these cases, a scammer’s partner could call you back with another fake caller ID showing up as the police or the DMV.
The main takeaway here is that the IRS will NEVER contact you by phone. They only contact you by mail. If you want to speak to an IRS representative over the phone, you need to call them yourself. If you ever get one of these calls, hang up and call the IRS hotline yourself. But don’t let yourself get bullied into sending money or releasing personal information to someone who calls you.
Scam 2 – Phishing scams
Phishing scams are pretty similar to phone scams except they are online scams. The criminals reach out to you by email telling you there’s a problem with your tax return. They might ask for your Social Security number or demand payment for unpaid taxes. Some tricky criminals will set up a website that looks like the IRS website. They’ll tell you to go to this fake site and enter in your personal information or credit card number.
Once again, the trick here is to remember that the IRS will never contact you by email. If you ever receive an email from someone claiming to be from the IRS, it’s a scam. Call up the IRS hotline and double check, but never give out information to someone who contacts you by email.
Scam 3 – Identify theft for stolen tax refunds
This is one of the scarier tax scams of 2015. If a fraudster gets a hold of your Social Security number, they can cause a couple serious problems. First, they can submit a fake tax return on your behalf. They do this hoping that you’re due for a tax refund. The criminal will enter in their address so the IRS will send your refund to them. When you file your return later in the year, the IRS will tell you that you’ve filed multiple returns and that your refund has already been paid out.
The thief could also report their work income under your Social Security number so the IRS will bill you for their income taxes. If this happens to you, you should file a report to your local police letting them know that your identity was stolen for tax fraud. You should also file a complaint with the Federal Trade Commission and place a fraud alert to the three major credit rating agencies. Once you’ve done this, you should complete IRS Form 14039 – Affidavit of Identity Theft and send it to the IRS. The IRS will review your situation and once it sees that your identity was stolen, it will pay you your stolen refund and will adjust your account so you won’t owe the scammer’s income taxes.
The best solution to this scam is to make sure it never happens in the first place by protecting your financial data. Be very careful with your SSN. Don’t leave your SSN card in your wallet and don’t give this information out unless it’s absolutely necessary. Most importantly, you should check your credit report each quarter so you can catch identity theft early.
Scam 4 – Fraudulent tax preparers
A fraudulent tax preparer pretends to be a legitimate accountant or other tax professional so that you’ll hire them to manage your tax return. This can lead to a few different scams. First, they might just be trying to steal your fee or personal information. They’ll ask for an upfront payment and your SSN to file your return. Then, they’ll just disappear.
Other fraudulent tax preparers get a little more complicated by actually filing an incorrect tax return on your behalf. They’ll cook the numbers and break tax laws to illegally lower your tax bill. That way, your refund will be bigger than expected. This “great” deal will catch up to you later on. The IRS will eventually catch the mistake and will demand that you pay the unpaid taxes and extra penalties. In worst case scenarios, they can even bring criminal charges against you for filing a fraudulent return.
This is why you need to be careful who you trust with your taxes. Ask your friends and family who they work with so you can find a reputable firm. You can also look for an account with an official designation like the CPA designation. At the same time, watch out for deals that seem too good to be true. If a tax preparer claims they’ll be able to get you a much higher return than the average accountant, it’s likely a scam. You should also beware of preparers whose fees are a percentage of your total refund because they’ll have more of an incentive to bend the rules.