Every year the IRS releases their "Dirty Dozen" list of the top tax scams tax payers encounter throughout year - not just during tax season. This year half of these "Dirty Dozen" scams are targeted directly towards innocent tax payers while the other 6 are trying to scam the IRS. I like to think all of my readers are not trying to scam the IRS, so this article will be about the scams that you could come across and what you can do to protect yourself.
Tax Identity Theft
No surprise here that identity theft is at the top of the list again. Identity theft occurs when someone uses your personal information, such as your name, Social Security number 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.
Telephone scams have been around almost since telephone's were invented but with our modern technology they are now much more sophisticated. Phone scams include many variations, ranging from instances from where callers say the victims owe money or are entitled to a huge refund. Some calls can threaten arrest and threaten to revoke your driver's license. Sometimes these calls are paired with follow-up calls from people saying they are from the local police department or the state motor vehicle department. Scam artists are also able to spoof an IRS phone number to make it appear the call is coming directly from the IRS.
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 scammer can commit identity theft or financial theft. Remember, the IRS will not contact with you by email to request personal or financial information. This includes any type of electronic communication, such as text messages and social media channels.
Promises of "Free Money" from Inflated Refunds
Scam artists will pose as tax preparers during tax time, luring victims in by promising large federal tax refunds or refunds that people never dreamed they were due in the first place. They will use flyers, advertisements, fake store fronts, and word of mouth in an attempt to prey on people who likely do not have a filing requirement, such as low income individuals and the elderly.
Return Preparer Fraud
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. If your tax preparer does not sign your return or insist on e-filing, you should be suspicious. Remember, you are legally responsible for what's on your tax return even if it is prepared by someone else. Make sure the preparer you hire is up to the task.
Impersonation of Charitable Organizations
Following major disasters, it's common for scam artists to impersonate charities to get money or private information from well-intentioned taxpayers. Scam artists can use a variety of tactics. Some scammers operating bogus charities may contact people by phone or email to solicit money or financial information. They may even directly contact disaster victims and claim to be working for the IRS to help the victims file casualty loss claims and get tax refunds.
Protect Yourself From Becoming a Victim
There is one thing all of these scams have in common - they attempt to get your personal information so they can pose as you, not only to the IRS, but to banks, employers, even law enforcement. The best way to protect yourself from any of these scams is to be proactive in keeping your personal information safe.
Most things you can do to protect identity are no-brainers - do not give out your social security number or personal information, shred personal documents, create strong passwords for financial accounts, monitor your credit, use virus protection, etc etc etc. However, there are some not so obvious steps you can take to protect your identity from more sophisticated internet scam artists...
- Install computer updates as they come out - these are often fixes for security holes.
- Install a firewall to your home or businesses network.
- Do not use multiple PC's to access your personal information over the internet and only use a PC you know to be secure.
- Always password protect your PC and cell phone.
- If you use a free email service like Gmail, Yahoo, or AOL make sure you enable a two-step verification process as these accounts are notorious for being hacked. In addition, do not send or retrieve sensitive personal information with these accounts unless you are able to do so with encryption.
What We Are Doing to Protect Our Clients
Our clients privacy and protection are very important to us. It is also important to our clients. Many of our clients are not comfortable sending information through email because of security risk. Also, as a CPA firm, we have a moral obligation to protect our clients sensitive data and we have a legal obligation to protect our clients privacy. This is why - among many others - that we are now offering our new Document Exchange service.
Our new Document Exchange services offers our clients security and convenience. All data exchanged through this service is automatically encrypted while in transit to our client's "vault" and while stored in the vault. This service also allows our client to have access to their folders - meaning they have access to their important documents 24/7.