Scammers are working overtime to separate honest taxpayers from their hard-earned money. These fraudsters are getting more sophisticated, moving beyond the obvious email phishing attempts to elaborate schemes that can fool even financially savvy individuals.
Learn to recognize these common warning signs that could save you from becoming the next victim:
Getting a bigger refund than anticipated. Bad tax advice is abundant. Sometimes it comes from unscrupulous tax preparers (like this one who filed false tax returns on behalf of her client). The IRS also warns that tax advice on TikTok and other social media has gotten taxpayers into trouble. “If it sounds too good to be true, it probably is,” the IRS warns. “Bad tax advice on social media may convince you to lie on tax forms or mislead you about credits you can claim.”
Unexpected tax letters, bills, or calls. The IRS will always mail a notice or letter as its first point of communication about a tax issue. For a refresher on how to respond, read our post here. Pay close attention to a letter rejecting a recent tax return because one was already submitted. It may be a clue that you’re a victim of identity theft. Remember, also, that the IRS will not call, text, or email to demand immediate payment of a tax bill, as this scammer did.
Unsolicited “help.” A more recent scam that has hit the IRS radar includes a “helpful” phone call, with the scammer offering to help the taxpayer set up their IRS.gov account. “This is just an elaborate scam designed to obtain valuable and sensitive tax information that scammers will use to try to steal a refund,” IRS Commissioner Danny Werfel explains. “This is another reminder that people should be wary of unexpected reach-outs from the IRS and other financial institutions. Taxpayers should avoid sharing sensitive personal data over the phone, email or social media to protect themselves and avoid getting caught up in these scams.”
More elaborate and high-net-worth scams. The more wealth you have, the more complicated your tax situation. Scammers often take advantage of this reality with elaborate schemes that, again, can seem too good to be true. Following their lead could result in significant interest, fines, or even jail time. The IRS recently called attention to a few of these schemes, including:
- Syndicated conservation easements that claim charitable tax savings exceeding the amount invested in the real property.
- Micro-captive or small captive insurance arrangements that often include implausible risks, fail to match genuine business needs and, often, unnecessarily duplicate commercial coverage already in place.
- Offshore accounts purported to be out of reach of the IRS. With today’s Foreign Account Tax Compliance Act (FATCA), the IRS can identify and track anonymous transactions of foreign accounts. Digital assets can also be tracked.
- Charitable remainder annuity trusts (CRATs) that are misused to eliminate capital gains. Utilized correctly, CRATs are recognized by the IRS as a beneficial tool.
While tax scams evolve constantly, your best defense remains unchanged: skepticism and vigilance. Work with a certified, reputable tax professional who can help spot and protect you from scams. Feel free to contact us with questions.