There are different types of tax-related scams that have been used for years by fraudsters trying to prey upon honest taxpayers. The IRS annually issues warnings in this regard and publishes lists of the most frequent tax-related scams people should be aware of in order to avoid falling victims. Here are 5 of the most common ones.
Identity Fraud Scams
Identity fraudcan take different forms. To be able to manage such a scam, a con artist needs the personal details of real persons and there are myriad ways in which they can access this information such as phishing emails with attachments that contain malicious software that accesses people’s files, fake emails that allegedly come from state institutions and ask people to provide personal data for verification purposes, etc. Once a fraudster has access to the sensitive personal information they need, they are able to impersonate people and apply for different benefits in their name, for example, for unemployment payments. To stay safe, always be wary when you receive emails from unknown senders or when someone is asking for your personal information.
Insider Fraud Scams
This type of fraud occurs when state employees use their credentials or those of other colleagues to inappropriately access people’s unemployment claims. By doing this, they can make different changes in the system, which will result in unqualified applications being approved or larger amounts of money being approved. They can even transfer unemployment funds to other accounts where they can access them.
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Tax Preparation Scams
These types of scams are carried out by people disguised as tax preparers or legitimate advisors who can file your tax documentation on your behalf. The victims are often vulnerable people such as seniors or people who don’t speak the local language very well and are not aware of how the tax system works. Scammers first get these people’s consent in helping them file their taxes. Then, they ask for a large service fee. In the end, they can even file the taxes incorrectly in order to gain refunds, for example, by inflating deductions. Once the refund becomes available, scammers forward it into their account. To avoid such scams, check the identity of the person who offers to work with you or don’t accept unsolicited offers and choose your own tax preparer by searching in the Federal Tax Return Preparer directory or a similar database.
False Tax Return Scams
Many scams don’t focus on getting money directly by asking people to make a transfer. Instead, they focus on obtaining the personal and financial information that would allow the authors to generate money in different fraudulent ways. One of these strategies is the false tax return scam which is possible when someone has access to your Social Security Number and files a tax return in your name. What happens with the money that comes along is that the scammer pockets your return instead of paying back your taxes. To avoid this scam, make sure you don’t share your SSN with anyone.
Offshore Money Transfer Scams
Offshore accounts automatically make us think of rich people and prosperous businesses that keep their money in remote countries, in order to avoid the high taxes applied in their country of residence. Offshore accounts are often a gray area that should be avoided by the regular taxpayer who is not aware of how these types of accounts work.
However, as it often happens, scammers leverage precisely these circumstances in which getting caught or being legally held responsible is difficult. Many online tax-related scams have focused on offshore accounts. What fraudsters typically do is that they send people emails promising to help them transfer their assets into an offshore account, which would drastically reduce their taxes. The problem is that doing this is not only illegal but also extremely risky. On the one hand, you risk being prosecuted by the IRS for these transfers, on the other, you risk not being able to get your money backs as the scammers will have total control over the account you’ve transferred the money into.
Avoiding a tax-related scam is not easy but it is not impossible either. To make sure your identity and your money are safe, always remember to be cautious when you share your sensitive data with anyone or when you choose to allow someone else to file taxes in your name.
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