Well it’s tax time again, did you file your taxes yet? If you’ve got yours done already you are way ahead of the curve, but if you don’t you may want to get them done sooner than later because tax scams have become a big problem especially over the last few years.
In fact according to CNBC the IRS expects pay out $21 Billion in fake tax refunds over the course of the next 5 years, which means income tax scams are a booming business for identity thieves.
How Do Tax Scams Work
Basic tax return scams work in many different ways but what typically happens is someone steals your financial details from your name, social security number, date of birth, and who knows what else. From here they file a fake return and submit it to the IRS.
What’s worse about this scam is that these scammers are literally untraceable, and in most cases you won’t know that anything is wrong until you go to file your taxes and they inform you that someone has already filed under your social security number.
Now you might be wondering how someone could possible get your information, and the reality is the possibilities are endless but here are few of the common methods these criminals will use in this particular scam.
- Phishing Scams. Phishing scams can come in all shapes in sizes but one of the most common ways they will steal your info is by sending you a fake email designed to look like it’s actually from the IRS claiming that someone is trying to steal your identity and that you have to verify your info.
- People In High Authority Places. The other common way people are getting hit up by this scam is by people who are in higher authority places, such as accountants, who will try to change information on your tax return so you get a bigger return. The problem with this is that it’s illegal for a tax professional to get paid by a percentage of your tax returns, or to falsify your tax returns.
The truth is your information is out there and someone could steal it. Now I’m not trying scare anyone because their are some things you can do to protect yourself.
How To Protect Yourself From Tax Scams
Before I dive into the different kinds of tips I came across a great video that covers some great points about ways to protect yourself from these scams by MoneyTalkNews.com.
To summarize things a bit here are 5 key tips to protect when you file your taxes this year.
- File Early – One way to prevent this from happening to you is to file your taxes early. According to CBS News almost 25% of all people will wait till nearly the last minute. However by filing sooner it gives scammers less time to hack your tax return and steal your hard earned money.
- Beware of Fake IRS Emails – The IRS will never send you an email to confirm your personal information, in fact they don’t send emails at all. This also goes with phone calls too.
- Don’t Alter Your Info – Another thing you’ll want to avoid is altering some of your tax info such as claiming you contributed more money to you retirement account or claiming you earned less than you really did. On top of that never let your tax professional do this with your return either. A lot of times they will want you to get a higher return for a cut in the profits. Just remember it’s your name going on that tax return and you and the tax accountant will be held liable if it’s wrong.
- Get A Copy Of Your Returns – Before leaving a tax professionals office make sure you get a copy of your return. This can prevent theft and save you from a whole lot of problems if something were to go wrong.
What tips can you give that will help people avoid getting hit by tax fraud this year?
Good post Chris! We’ve not filed yet, but will be taking our stuff to the CPA’s office this week to get filed. We wait until after February 15th as brokerages have until then to send out 1099’s now. Getting a copy of your return is a big thing to do as well. We keep ours electronically as well as a paper copy.
Yeah I got a few 1099’s to deal with as well and on top of that I have ownership in two LLC businesses so my taxes can get really complicated quick. Infact we usually don’t get finished until one of the last days which kind of sucks but theirs not a whole lot I can do about it.
I’m all done with the exception of the consolidated 1099 from TD Ameritrade. If it wasn’t that I like their stock tool so much I think I wouldnt use them anymore., The 1099 is a lte comer year after year!
Completely forgot to file this year! 6 weeks left but thanks for the reminder!
Good post. I just filed my tax returns and already got my refund so I am safe for this year. I would also add is never to have your ss# on you just in case you somehow lose it
I’ve never used TD Ameritrade before but I’ve always been wondering what their stock tools were like. I may have to check them out some day, for now I need to focus on getting my debt paid back down and building up a more solid savings. Thanks for comment Jose.
Defiantly don’t want to forget to that Pauline. I hate to deal with ugly fees and penalties.
That’s a great tip Kevin. I use to carry my social security number on me all the time until I realized one day it was buried in my wallet. I could only imagine the damage that could have been done if someone got a hold of it. Thanks for stopping by Kevin I really appreciate it.
That is really scary. Luckily, I have a great CPA who would never be a scammer. I would recommend knowing who does and handles your taxes. Taxes scare me anyway. I don’t want to think about someone stealing my identity from them, but we all need to be very careful.
Wow, Chris. I had no idea people did this kind of thing! Thanks for the great info. It’s so nice to know what’s going on out there so we can protect ourselves.
I live in Australia and still get those stupid IRS tax scam emails. Obviously they aren’t targeting it terribly specifically.
I’m glad you pointed out to be careful of fake IRS emails. I think a lot of people (myself included) think that when something hits our inbox, it’s legit. And that’s not always the case — especially around tax time. Smart tips here!
Man, I didn’t even think of tax fraud! Most people hate doing their taxes, so I don’t know if people would expect someone wanting to file on their behalf! 🙂
I hear ya their Kim. I know my CPA by first name and I know she would never do anything like that to me. Sometimes I think some of these nameless accountants just want to do as many tax returns as possible and don’t care what you get back as a return, kind of scary when you think about it.
I learned about a lot about tax scams last year and never knew it was such a big deal either. I take a lot more care into who is accessing my identity now as a result. Thanks for stopping by Laurie.
Yeah it’s amazing what scammers will do to reach out to people to scam them, even if they don’t live in the US or involve them. Thanks for the comment Glen.
It’s crazy how legit some of these emails will look Carrie. My brother got an email one time from a supposed eCommerce site that he shopped at regularly, that said someone had hacked his details and that he needed to confirm his information. Luckily, he figured out it was a scam before it got to far but it just goes to show how far these scammers will go.
That’s a great point Vicky. All it would take for someone to steal your tax return would be your financial details and a copy of Turbo tax, and they could file a return under your name. That sounds scary but if you take care of your identity you will be less pron to this kind of issue. Thanks for your support Vicky I really appreciate it.
A wealth of information Chris. I usually wait until around now to file. The 1099’s are always the last to come.
Good point Grayson. I just got my last 1099’s the other day, and I still have to get things together yet for my schedule C online business yet as well. On top of that did I mention I’m moving this weekend? I guess when it rains it pours.
I would have never guessed that the payout for fake returns is that high. With electronic delivery it seems like they would be more at danger to that. It’s a good thing I get mine in as soon as possible every year.
Yup, it seems the longer you wait the more vulnerable you are. The problem with that is most business owners don’t usually file until the very end since their is so much work that goes into getting their taxes down. I think last year it came down to April 14th till I got it all done. Thanks for stopping by My Money Design.