Scammers posing as IRS inspectors are at the top of the IRS’s “Dirty Dozen” list of tax frauds for the 2015 filing season. Identity theft, fake emails or phishing operations, and tax return preparer fraud were all rising. Last week, A Powerful Firm momentarily suspended state e-filing tax return transmission due to many jurisdictions’ phony tax returns.
“Every year, the degree of complexity rises a notch,” says a tax partner at a pretty huge accounting firm. “Scammers may impersonate the IRS on websites, emails, and even caller ID messages.”
Several tax professionals spoke with US News about reducing your risk during tax season.
Be cautious of IRS phone calls or emails. If the IRS has to contact you, it will usually do so by mail rather than phone or email. “Once you’ve started a relationship with them, they’ll call you back and such,” says a tax and business conferring partner at an accounting, tax and business consulting firm in New York. For example, according to the partner, one of his customers received a call from an IRS agent claiming to be collecting on a tax bill. “He was quite unhappy about that,” they added, “but he phoned us, and we checked that he had no obligations.”
Scammers may threaten to imprison you or deport you. “They frequently try to target vulnerable populations such as the elderly or immigrants,” they warn. Because these organizations may not be aware that “the IRS doesn’t function this way,” he argues, they may contribute money to a fraudster out of fear of being arrested or facing immigration problems. So hang up the phone unless you’re already in contact with the IRS.
Email phishing is also on the rise, so don’t click on links or provide personal information in emails, even if the sender appears legitimate. For example, one of a partner’s high-net-worth clients received an email stating that he was due a $25 refund and needed to claim it by filling out the accompanying form. “He might have exposed himself to serious theft if he had just gone out and done it himself,” partner argues. Fortunately, the customer initially sought advice from his firm.
As quickly as possible, file your tax return. When someone shoots a fake tax return using your Social Security number, it can cause significant delays in your tax refund and other problems, so submit as soon as possible. “It’s kind of a ‘first to file’ thing,” says a tax preparer in the state of California. “But most of these fraudsters are filing early, and there’s not much you can do about it [if you’re still gathering information].” Several years ago, he was the victim of tax identity theft. Fortunately, he wasn’t anticipating a refund, but it took him and his wife nine months to resolve the duplicate return issue. When possible, he advises against revealing your Social Security number.
Select a reputable tax preparer. Preparers who submit a fake return in someone’s name or offer exaggerated refunds are examples of return preparation fraud. “Some of these situations involve a pop-up shop where they complete your tax forms and market [your information],” a tax preparer explains.
A client came to him after having her deductions fabricated by a tax preparer. “The preparer was making up the deductions on the return in terms of charity donations and company costs to receive a higher refund since the preparer’s fee was predicated on the size of the refund,” he said. The customer ended up owing the IRS a balance plus interest. Most tax preparers charge based on the difficulty of the return rather than the refund quantity, so someone who is compelled to obtain you a considerable refund may not be acting ethically.
Unless you have had significant life changes, such as getting married, starting a business, or receiving a significant rise or fall in income, your tax status should remain relatively constant from year to year. “If you have a new preparer who is advocating a lot of modifications suddenly,” adds the tax preparer, that might be a red sign. He recommends double-checking data like W-2 amounts and mortgage interest to make sure they’re correct and hiring a tax preparer who has dealt with individuals you know. “At the very least, you should acquire a handful of suggestions,” he advises.
Also, inquire about the credentials of the preparer. You don’t have to use a CPA, but your tax preparer should have an IRS-issued preparer tax identification number, which you should give on your tax return. “Some private preparers will prepare the return as if it were self-prepared and submit it without a [preparer tax identification number],” warns the tax preparer. It might signal that they’re attempting to blend in rather than stand by their job.