3 Tax Scams to Watch Out For This Year

Fraudulent tax schemes have devastated many families. From losing money to forfeiting personal information, tax scams can have a detrimental effect on a person’s life. Scammers use many means to identify and initiate contact with their targets: phone, email, social media, and regular mail.

There are a few telltale signs that your letter from the IRS is not real. Here are some of the easiest ways to tell that it is a scam.

  • Threats
    • Many scammers use threatening language and tactics in order to scare their targets into giving them money. These threats range from calling in police action to deportation in some cases. This aggressive language is the first sign that something is not right. The IRS will not use such language to convey a payment discrepancy
  • Specific payment methods
    • Scammers want to get the most money they can and quickly meaning that many will specify in their letters that the money should be paid from a debit card or wire transfer. The IRS will not specify a payment method, rather they start by sending a bill to any taxpayer who owes taxes.

In order to keep you safe this tax season, I’d like to outline 3 of the main tax scams: how to identify them and ways of avoiding them.

1. Telephone Scams

One of the most prevalent ways scammers try to trick you is through IRS impersonation phone calls. Giving a fake name and IRS identification number, these scammers try to convince you that you owe taxes to the government. Adding to the scheme, the callers often do know a lot of personal information about the target such as their name, address, and occupation.

If you find yourself on the receiving end of one of these calls, here are a few things to watch out for.

  • The caller will often state that the person owes a significant amount of money
  • They will demand the payment be made over the phone through a wire transfer or debit card
  • Hostile language and threats of arrest and deportation are scare tactics they use to manipulate the victim
    • Scammers threatening deportation often approach their target in their native language
  • Demand payment without allowing for you to question the amount you owe
  • If you don’t answer, they also leave threatening voicemails urging for a quick call back.

This situation illustrates what commonly happens to people on the receiving end of a scammer’s call. But they have other tricks up their sleeve. Some scammers don’t call to hound you for fake outstanding taxes, some call with the promise of a tax return. They do this in order to get you to disclose private and personal information about your taxes, credit cards, and even Social Security number.

What’s more is that these scammers even create video scams in order to try and deceive the deaf and hard of hearing.

Being aware of these common tactics will help you and your loved ones stay safe from telephone tax scammers.

2. The World Wide Web

There are so many scams on the internet now-- people trying to hack into your computer to obtain sensitive information. IRS tax scammers can be found here too, especially through email, phishing, and malware scams.

Phishing is pretty much exactly how it sounds, it is a tactic where people “fish” for information. This has been an increasing problem in the last few years. Here are some ways to determine if an email is just downright fishy:

  • The email will contain the IRS logo (or something that closely resembles it)
  • The message will ask for confirmation of personal information, filing status, and refund information
  • If the email appears to be coming from a tax professional and it asks you to confirm information on your IRS form including life insurance and annuity information.
  • They will often contain an urgent call to action button. For example, click here now, update e-filing immediately. These websites often contain viruses that allow people to hack into your computer to get your information and see your history.

3. Business Professionals

Taxpayers are not the only ones who are targeted by scammers. Tax professionals are a huge market for scammers as they have a treasure trove of information. This year the IRS is warning these professionals to keep an eye out for fake payroll deposit and wire transfer emails. The IRS won’t ask for a wire transfer, that is one thing to always remember.

Business and human resource professionals also have to keep an eye out for the W-2 scam that is causing a big problem right now. This is a scam that attempts to obtain W-2 information from payroll and HR.

There are many ways that scammers try to get what they want. Understanding their tactics and behaviors will better allow you to stay clear of them. If you would like more information on these and other tax scams, visit the IRS website. Have additional questions? Contact us today. We’re happy to help.

Wood Smith Advisors, a woman-owned Registered Investment Advisor (RIA), is a fee-only financial services firm that partners with its clients to simplify their financial lives. We focus on women, entrepreneurs and individuals with complex financial situations, providing objective and competent advice, education and services to help them develop and build their businesses and reach their financial goals. We can be reached by clicking here.

"Finance Made Simple" blog posts are intended for educational purposes and not for specific advice. Each person’s situation is different. Consult your financial advisor for advice relating to topics discussed.

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