The IRS recently released its “Dirty Dozen” list of tax scams for the 2015 filing season, and phone calls from scammers posing as IRS agents top the list. Fake emails or phishing schemes, identity theft and tax return preparer fraud followed close behind. In fact, due to fraudulent tax returns filed in several states, TurboTax temporarily paused state e-filing tax return transmission last week.
“The level of sophistication gets a little better every year,” says Paul Gevertzman, a tax partner in accounting firm Anchin, Block & Anchin. “Scammers can make websites and emails, and even caller ID messages, look like they’re really coming from the IRS.”
U.S. News talked to several tax experts about how to minimize your risk this tax season.
Be wary of phone calls or emails from the IRS. If the IRS needs to contact you, the agency will typically do so by mail, not phone or email. “Once you’ve established a dialogue with them, they’ll call you back and such, but only after you’ve initiated contact with them,” says Dave McKelvey, a tax and business consulting partner at New York accounting firm Friedman LLP. McKelvey says one of his clients received a call from someone claiming to be an IRS agent collecting on a tax bill. “He was very upset by it, but he called us, and we verified that he had no liabilities,” he says.
Scammers may threaten jail time or deportation. “A lot of times they try to target groups like the elderly or immigrants,” Gevertzman says. These groups may not realize that “the IRS doesn’t work this way,” he explains, so they might give a scammer money out of fear of arrest or immigration troubles. Unless you’re already communicating with the IRS, hang up the phone.
Email phishing is also a growing problem, so don’t click on links or give out personal information via email, even if the sender seems legit. One of Gevertzman’s high-net-worth clients received an email saying he was owed a $25 refund and needed to fill out the attached form to claim it. “If had he just gone out and done it himself, he could have exposed himself to substantial theft,” Gevertzman says. Fortunately, the client consulted his firm first.
File your return as soon as possible. When someone files a fraudulent tax return using your Social Security number, it can delay your tax refund significantly and create other headaches, so file early if you can. “It is kind of a ‘first to file’ thing, but most of these scammers are really filing early and there’s not much you can do about that [if you’re still gathering paperwork],” says Jim Kealing, a Valencia, California-based tax preparer. Kealing was the victim of tax identity theft several years ago. Fortunately, he wasn’t expecting a refund, but it took about nine months for him and his wife clear up the issue with the duplicate return. He recommends not sharing your Social Security number when you can avoid it.
Choose a trustworthy tax preparer. Return preparer fraud can take a few different forms, including preparers who file a false return in someone’s name or promise inflated refunds. “Some of these cases involve a temporary storefront where they would prepare your tax returns and resell [your information],” McKelvey says.
A client came to Kealing after getting burned by a tax preparer who falsified her deductions. “The preparer was basically making up the deductions that were on the return in terms of charitable contributions and business expenses to get a larger refund because the preparer based her fee on the size of the refund,” Kealing explains. The client wound up owing a balance to the IRS, plus interest. Most tax preparers base their fee on the complexity of the return, not the size of the refund, so someone who’s incentivized to get you a large refund may not be operating above board.
Unless you’ve experienced major changes like got married, started a business or made a significant increase or decrease in pay, your tax situation shouldn’t change that much from year to year. “If all of a sudden you have a new preparer who’s recommending a lot of changes” that could be a red flag, according to Kealing. He suggests double-checking figures like the amounts from your W-2 or your mortgage interest to ensure they match, and choosing a tax preparer who’s worked with people you know. “You really should get at least a couple of recommendations,” he says.
Also, ask about the preparer’s credentials. You don’t have to work with a certified public accountant, but your tax preparer should have a preparer tax identification number that’s issued by the IRS and included on your tax return when you file. “There are private preparers that will prepare the return as if it’s self-prepared and file it without a [preparer tax identification number],” Kealing cautions. This could indicate that they’re trying to fly under the radar instead of standing behind their work.
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The ‘Dirty Dozen’ Tax Scams to Avoid originally appeared on usnews.com
