The Dirty Dozen: How Can You Protect Yourself?
Tax season has begun, and along with being diligent about filing taxes, we need to be very diligent about tax scams, fraud, and identity theft, as these crimes increase this time of year. According to a 2019 Identify Fraud Study conducted by Javelin Strategy and Research, 14.4 million people were victims of these scams and lost a combined $3.4 billion. That’s right–billion. In addition, mobile phone takeovers and scams are increasing. To make consumers more aware of these scams, the IRS publishes an annual report of the various scams, called The Dirty Dozen. So what exactly are these scams, and how can you protect yourself? Check it out below:
2020’s “Dirty Dozen” Scams:
Look out for an influx of fake emails claiming to be the IRS or who ask for your personal information. The IRS asserts that it NEVER contacts people through email, so if you get an email, it’s a scam.
2. Phone Scams
Criminals call and impersonate IRS agents and threaten arrest, deportation, and more to frighten people into sharing information. The IRS reports that these have increased in the past few years.
3. Identity Theft
Be on high alert for shadowy sites or emails that ask for personal information. While this threat happens all year, during tax season criminals file fraudulent tax returns using someone else’s social security number.
4. Return Preparer Fraud
The scam in this case is the preparer themselves. These false preparers often operate only during tax season and scam their clients through identity theft, refund fraud, etc.
5. Inflated Refund Claims
Beware of preparers promising inflated tax returns and ask you to sign a blank return or charge fees based on the percentage of the client’s returns. These cons often set up shop in fake storefronts and by putting up flyers.
6. Falsifying Income to Claim Credits
Question preparers who try to convince you to invent an income source or inflate your income in order to qualify for higher tax credits. These scams often require victims to pay large fees in back taxes and penalties.
7. Falsely Padding Deductions on Returns
Don’t be tempted to inflate deductions, such as charitable donations, or business expenses in order to receive a larger refund.
8. Fake Charities
Watch out for groups posing as charities to solicit donations and your personal information. Of course it’s good and admirable to give back, but make sure you’re giving back to a legitimate organization first. If you’re unsure of any charity reaching out to you, check out the IRS website which has tools to check the statuses of charities and organizations.
9. Excessive Claims for Business Credits
Don’t apply for unusual tax credits or tax benefits that don’t apply to most individuals. It’s a red flag. Some of these credits include the fuel tax credit or research credit.
10. Offshore Tax Avoidance
If you’re reading this article, this most likely doesn’t apply to you, but as we sometimes see with the 1% and the super-wealthy, hiding income and money offshore is a big no-no. If you do, there’s big legal consequences.
11. Frivolous Tax Arguments
Paying taxes isn’t “fun”, but beware of schemers who encourage taxpayers not to pay or to question the legality of taxes in the first place. Don’t fall for it–filing a frivolous return can result in jail time or fines up to $5,000.
12. Abusive Tax Shelters
Be on the lookout for peddlers who promote tax shelters and complex trusts or easements (essentially, a shadowy too-good-to-be-true product, financial arrangement, or scheme) that claim to reduce your income tax.
If you’re still feeling a little apprehensive about how to catch a scam or if you have any further questions, you can always reach out to one of the multiple financial and banking resources here in Jersey City. In addition, the IRS also publishes a list of tips and tools to help you protect yourself and steer clear of these scams. With the increase in these crimes, and with how sneaky these scams can be, its best to educate yourself and contact a professional if you have questions–better safe than sorry (for you and your bank account!).