5 Tax Season Scams to Avoid

5 Tax Season Scams to Avoid

by Al Perales, Investigator, Iowa Attorney General’s Office

While the weather may still be bitterly cold, it is the season for tax scams to start heating up. Make sure you are aware of the latest schemes con artists are using to steal your tax refund or your identity.

1. Tax Preparer Fraud

While 53% of Americans use a tax preparer and they are a vital part of our tax system, its important to remember you are responsible for the accuracy of your tax forms.

To increase their fees, sometimes tax preparers attempt to mislead you to take credits or deductions you are not entitled or offer you a too-good-to-be-true refund. Others just don’t understand complicated tax structure and some are just con artists pretending to be tax preparers.

The IRS warns about “ghost” tax return preparers who don’t sign your tax return that they’ve prepared. By law, they are required to sign and provide a valid Preparer Tax Identification Number (PTIN). Often ghost preparers require payment in cash for their preparation services and just take the money and run. Sometimes they file your taxes but direct your refund into their personal bank account.

The IRS and the Iowa Attorney General’s office work together to assess significant penalties against shady return preparers, stop scams and prosecute criminals. In Iowa, many of the ghost preparers prey upon Iowans whose native language is not English.

Always double-check to make sure your tax preparer has the right credentials and qualifications.

2. IRS Imposter Scam

In this scheme, the con artist pretends to be the IRS stating you owe money on top of what you filed. If you are uncooperative, they threaten to arrest you or disable your social security number. You may be notified by phone with the caller ID spoofed to say it is the IRS or notified by email and directed to a very official-looking but fake IRS website. They may already have the last four digits of your social security number.

They also impersonate law enforcement threatening arrest if you don’t pay your delinquent tax bill immediately. The IRS will never strongarm you into paying your taxes. If you get such a call, contact the police.

3. Tax Refund Fraud

Instead of impersonating the IRS, con artists obtain your Social Security or taxpayer ID number, plus other personal information, to impersonate you to get their hands on your tax refund before you file.

In another imposter scam, the tax thief calls your tax preparer posing as you, stating you have some last-minute changes you want to make to your tax return, for example that you found another receipt for a charity donation to add to your deductions. The thief then takes a picture of the receipt and texts it to the tax preparer and then calls your tax preparer back and changes the direct deposit information to steal the refund.

Starting this year, you can request an IP PIN from the IRS to help them verify your identity when your tax form is submitted. Tax preparers should consider using a multifactor authentication protection feature to protect clients.

4. W-2 Business Phishing Scheme

Businesses also need to watch out for scammers trying to steal your employees’ identities. In this scheme, the criminal pretends to be the CEO or other top official asking human resources or payroll for sensitive W-2 data. Small and large companies across the U.S. have been victims. The criminals either file a tax return with the W-2 info to get the employee’s refund or sell personal information, including the employee’s social security number, on the black market. If your business was phished, make sure you report it to the IRS.

5. Online Scams: Malware & Ransomware

Over the past year, a phony email claiming to be from the IRS has circulated widely across the county. The email subject line often reads “notice of underreported income” and the email contains a link or an attachment for the taxpayer to review their tax statement. Once the recipient opens the attachment or clicks on the link, malware is downloaded onto the victim’s computer.

Another imposter scam claims to be an email from the FBI linking to a downloadable questionnaire regarding tax compliance. Instead, the link downloads ransomware which holds your computer’s data hostage until you pay up. Never open a link or download a file from an unknown source and remember: the IRS never uses email, text messages or social media to discuss personal tax items.