Dirty Dozen Tax Scams for 2014
The Internal Revenue Service recently released its annual "Dirty Dozen" ranking of tax scams, reminding taxpayers to use caution during tax season to protect themselves against a wide range of schemes ranging from identity theft to return preparer fraud. Here's a summary of three of the most common tax scams and ways that consumers can protect themselves:
Once again, tax fraud via identity theft tops this year's Dirty Dozen list. Identity theft occurs when someone uses your personal information, such as your name, Social Security number (SSN) or other identifying information, without your permission, to commit fraud or other crimes. In many cases, an identity thief uses a legitimate taxpayer's identity to fraudulently file a tax return and claim a refund. The IRS has a special section on their website (www.IRS.gov/identitytheft) dedicated to identity theft issues, including YouTube videos, tips for taxpayers and an assistance guide.
Phishing is a scam typically carried out with the help of unsolicited email or a fake website that poses as a legitimate site to lure in potential victims and prompt them to provide valuable personal and financial information. Armed with this information, a criminal can commit identity theft or financial theft. If you receive an unsolicited email that appears to be from either the IRS or an organization closely linked to the IRS, such as the Electronic Federal Tax Payment System (EFTPS), report it by sending it to firstname.lastname@example.org. The IRS does not initiate contact with taxpayers by email to request personal or financial information.
Return Preparer Fraud
About 60 percent of taxpayers will use tax professionals this year to prepare their tax returns. Most return preparers provide honest service to their clients. But, some unscrupulous preparers prey on unsuspecting taxpayers, and the result can be refund fraud or identity theft. Consumers should use only preparers who sign the returns they prepare and enter their IRS Preparer Tax Identification Numbers (PTIN). Other "red flags" of unscrupulous preparers include: charging a percentage of the refund as a preparation fee; not providing the consumer with a copy of the completed return; and promising larger-than-normal refunds. The Wisconsin Better Business Bureau has more tips for choosing a tax preparer online at www.wisconsin.bbb.org.
Keep these scams in mind as you get ready to file your taxes this year. Always remember: if it sounds too good to be true, it probably is. You can read the full list of scams on the IRS website.