Don't Be an April Fool: 5 Tax Scams That Can Trick You Out of Your Cash
What's your favorite April Fool's Day prank? Sneaking a whoopie cushion on someone's seat? Dropping a fake spider on your co-worker's sandwich? Putting shaving cream in a sleeping buddy's hand and then tickling his nose?
As some of us delight in tricking our friends on April Fool's Day, scammers take pleasure in tricking people, too—but their mischief results in far greater consequences than a nose full of shaving cream.
That's especially true as we approach the tax return filing deadline, which this year falls on Tuesday, April 18. Fortunately, you can avoid playing the (tax) fool this April by learning more about common tax-related scams. Check out five below.
1. IRS Phone Scams
April isn't just a month for pranks—it's the month that much of the country files its tax returns.
For some, preparing taxes can be a stressful experience. Unfortunately, sometimes phone scammers add to filers' tax angst. The IRS reports that, during tax filing season, the agency generally sees a surge of scams in which fraudsters impersonate IRS agents and threaten people with arrests, deportation and more in attempts to bilk them out of their money. Learn more about how to protect yourself here.
2. Tax Season Phishing
In phishing scams, con artists impersonate legitimate entities through emails. They send emails that appear to be from a legitimate account in an attempt to trick people into revealing sensitive information, such as bank account passwords, or providing money. During tax filing season, phishing scams are often tax-related.
"Email messages can look like they come from the IRS or others in the tax community,” IRS Commissioner John Koskinen said in a recent written statement. Koskinen said taxpayers should avoid opening "surprise emails" or clicking on links supposedly provided by the IRS.
"Don’t be fooled by unexpected emails about big refunds, tax bills or requesting personal information," he said. "That’s not how the IRS communicates with taxpayers.” Learn more at the IRS's Report Phishing and Online Scams page.
3. Tax-Related Identity Theft
When phone scammers, phishers or other fraudsters succeed in learning a taxpayers' Social Security number or Individual Taxpayer Identification Number, they may use that information to file a tax return and claim a refund. That's a form of identity theft.
The IRS has warned that it's not just individual taxpayers who are being targeted by identity thieves, but also tax preparers. To learn more about protecting yourself from identity theft, check out this IRS publication.
4. Tax Return Preparer Fraud
Sometimes tax preparers are targeted by scammers, and sometimes they are the scammers. Return preparer fraud occurs when con artists claiming to be tax preparers use the information provided by their victims to commit identity theft, steal tax refunds and more.
The IRS’s Koskinen said in a recent written statement that most tax preparers "provide high-quality service," but the agency still encounters "unscrupulous preparers" every year.
"Choose your tax return preparer carefully because you entrust them with your private financial information that needs to be protected," Koskinen said. See the IRS's tips for choosing a tax preparer here.
5. Fake Charities
When consumers give to charity, they may first and foremost be concerned about doing some good, but it doesn't hurt that charitable contributions also often qualify for tax deductions. Unfortunately, those who unwittingly give to fraudulent charities won't realize either benefit.
To determine whether a charity is legitimate, use the IRS' Exempt Organizations Select Check tool here. The IRS also recommends avoiding contributing cash, as contributions by check or credit card are easier to document for security and tax purposes.
If you suspect you have been a target of a tax scam, you should report the incident to the Treasury Inspector General for Tax Administration through its website. You should also report it to the Federal Trade Commission using the FTC's “Complaint Assistant.”
April Fool's Day pranks may be funny, but tax scams are no joke. Be careful this tax filing season so fraudsters don't end up having the last laugh at your expense!