Common Tax Scams and How to Protect Yourself

Are you prepping for tax season? You’re not the only one. The beginning of the new year is a common time for scammers to start working double, and it’s more important than ever to be aware of the common tax scams. Learn what red flags to look for, how to protect yourself and what to do if you think you’ve fallen for a tax scam.

Common Tax Scams

Tax scammers are constantly coming up with new ways to get your money—or sensitive personal information. But most tax scams fall into one of these three categories:

1. Tax Preparation Scams

Tax preparation scams are when a scammer convinces you they’re a legitimate tax preparer. You may pay them for their service without actually getting anything in return, but the bigger issue is that you’re handing over all your personal information. They get access to your Social Security numbers, date of birth, driver’s license and bank account information if you planned on direct deposit. 

2. Identity Theft Scams

Examples of identity theft scams include phishing emails and fraudulent text messages and phone calls. For example, you may get an email saying someone has already filed a tax return in your name and asking you to log in to a website or verify your information. When you do this, the scammers get access to the information they need to steal your identity. 

3. Fraudulent Information Scams

A third common tax scam that may be less obvious is when someone—often an unscrupulous tax preparation service—convinces you to provide false information on your tax returns or to the IRS. This may include:

  • Taking deductions or exemptions you don’t actually qualify for
  • Overreporting expenses
  • Not reporting all your income
  • Claiming a dependent you aren’t legally able to claim

Bottom line: If someone is telling you to provide any inaccurate information to the IRS, it’s a red flag for a tax scam.

How Do People Steal Tax Returns?

Scammers may try to steal your tax returns to get access to your personal information, such as your full name, address, date of birth, banking information and Social Security number. Someone can steal your tax returns by going through your trash, hacking into a cloud storage drive or just looking over your shoulder if you’re doing your taxes in a public, nonsecure place.

3 Ways to Protect Yourself From a Tax Scam

Being aware of common tax scams helps you know what red flags to look for as you choose a tax preparation service or file your taxes yourself. Here are three more ways to protect yourself this tax season.

1. Keep Your Personal Information Secure

The best way to prevent a tax scam is to ensure you’re properly protecting your personal information. Never give out your personal information to people you don’t know, and avoid providing identifying information through email, text or social media. If you’re ever in doubt as to whether a request for information is legitimate, call the official phone number for the company and ask them to verify the request.

2. Properly Vet Tax Preparation Services

If you’re planning on using a tax preparation service, make sure to thoroughly vet them. A quick Google search and a read through their reviews can help you make sure the provider is legitimate. You may also want to check if they’re listed with the Better Business Bureau—and what their ratings are. 

3. File Your Taxes as Early as Possible

One common tax scam is to file a false tax return in someone else’s name to get their refund. Scammers use your info but have your refund deposited into their account. To avoid falling victim to this type of scam, file your taxes as soon as possible. 

Help! I Think I’m a Victim of a Tax Scam

If you think you’ve been the victim of a tax scam, it’s important to alert the IRS as soon as possible. It’s also a good idea to pull your credit report to check for any inaccurate info or accounts that have been opened without your knowledge. Enrolling in identity theft protection can also help you monitor your identity and credit afterward to catch any long-term issues. 

Additionally, you may want to file a police report with your local precinct. It can be very difficult to find and prosecute these types of crimes, but reporting it can help investigators find trends or warn others in your community.

How Can I Find Out If Someone Filed Taxes in My Name?

The most efficient way to find out if someone has filed a tax return in your name is to contact the IRS and ask what the status of your tax return is. You may also get a notice from the IRS, called a CP01E. This notice alerts you that the IRS believes someone has used your SSN to get employment. While this doesn’t have any direct effect on your tax return or tax status, it can be a warning sign that your identity has been compromised and you need to double-check your tax status.

Whether you’re anticipating a big refund or just hoping to owe less than last year, it’s important to be aware of the common tax scams and how to protect yourself during the upcoming tax season.

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