The tax scam is a menace that appears to be increasing every year and it’s a situation that has the potential to affect many, if not all of us in one form or another. In fact, according to Federal Trade Commission data, one in three Americans between the ages of 20 and 29 has suffered at the hands of fraudsters.
The problem reaches far and wide, with elderly and vulnerable people also falling foul of scams, including everyone in-between who pays taxes and has to tackle common IRS forms such as the W-2.
If you’ve got a social security number then it’s reasonable to imagine that you could be targeted by a tax scam.
- We've put together a list of the best accounting software
- Get your finances in order with the best personal finance software
- Also check out the best bookkeeping software on the market
Criminal activity
It’s a universal issue and, even if you feel that you’re fairly savvy and on top of things when it comes to knowing what to look for, tax scams are a very real threat. However, some tax scams are easier to spot than others. We’re all familiar with phishing, which involves the propagation of fake emails, websites and online advertisements that try to get your personal information.
Similarly, phone scams are perhaps the most prevalent of the tax scam selection, with criminals frequently using impersonation to fool you into thinking they’re agents from the IRS. Popular ruses for the phone tax scam callers are to threaten you with a host of penalties, including legal action for unpaid taxes through to deportation, and all points in-between.
Another issue is when your tax identity information is stolen after criminals manage to obtain your Social Security number. This can be used with other personal information to file fraudulent tax returns, often quite early on in the tax season. Your data can often appear on the dark web, where criminals buy and sell user data that will subsequently be used for fraudulent activity.
The scams are, unfortunately, many and varied.
Combating tax scams
Once you’ve got an idea of what to look out for, and let’s face it many of us at least know the warning signs but still don’t feel confident we’re doing the right thing to fight back, it’s time to take evasive action.
Protecting yourself from tax scams requires a little bit of effort, but this is time well spent if it helps you to fend off criminal activity.
Not all of us are super organized, but it is a prudent security measure to combat tax scams by getting your tax return filed as early as possible. Similarly, guard your Social Security number in the same way you would your finances and other personal items.
Criminals are always on the lookout for ways of purloining your details and data including Social Security numbers are often kept in vulnerable places such as wallets and smartphones.
Compromised data
Keeping an eye on anything that might appear unusual about any of your online accounts is crucial. Now that most of us have multiple profiles in a variety of online locations, such as bank accounts and credit unions plus shopping, grocery, accountancy and taxation profiles, there are potentially lots of places where the unscrupulous can go after your personal information.
It’s a good idea to change passwords on a regular basis for starters, which sounds like an obvious thing to do. However, many of us don’t actually bother to do this, or rely on the same and frequently relatively easy to guess password for multiple accounts.
The idea is to make the life of the scammer harder, not easier, so do your bit and make those changes.
- Check out the best business password management software
Potential warnings
If you receive anything that appears untoward, via email, phone or even in the mail then it’s vital you remain vigilant, especially if you have reason to believe that your Social Security number might have been compromised.
You may find that you start getting conflicting information about your Social Security number, or get stopped from filing altogether, which could be a sign that your details are being used elsewhere.
Equally, don't be tempted to respond to any emails or texts from anyone purporting to be from the IRS. The Internal Revenue Service does not contact individuals in this way, so any communication that comes to you other than via conventional postal mail, including anything posted on social media, should be given short thrift.
If you’re in any kind of doubt then it’s always best to contact your local IRS office to clarify anything that might be bothering you.
- We've also highlighted the best identity theft protection
Legitimate preparers
Whilst it might be tempting to try and cut corners, you must also be sure to get help from a reputable tax preparer. If you prefer to have some else get your accounts ready come tax time then it’s vital to use someone that is legitimate and has the appropriate credentials. Ask to see their Tax Preparer Identification Number, which can be cross-checked against a database on the official IRS website.
The same goes for anyone else who calls you up suggesting they are someone from an official channel. The coronavirus pandemic has caused chaos and criminals have been quick to see it as another opportunity, with scammers using tactics such as saying you need to pay a fee to get a stimulus check. This is not a requirement from the IRC or any other government department.
The list of fake callers, scam texts and bogus social media messages goes on, and it continues to change as tax scammers have to fine-tune their techniques to evade detection. Be diligent with your checks, and disregard anything that you don't feel happy about. If the IRS isn’t writing to you via the postal service then you’ve every right to be suspicious. Even regular mail should be double-checked however.
Universal threat
While the US faces unprecedented levels of tax scams, taxpayers on the other side of the Atlantic face similar problems. HMRC has seen huge rises in the levels of suspicious phone call activity, along with phishing emails and other online threats from criminals.
Again, the advice is the same; be prudent and disregard any calls, texts or messages you receive because HMRC will not contact you in this way.
Emails pretending to be from HMRC have now become very sophisticated and it’s often easy to miss the telltale signs that they’re fake too. If you get an email which is supposedly from HMRC that says, for example, that you are due a tax refund then it’s crucial that you don't click on any links in it, or respond by giving away any information.
Message risk
The same goes for the thousands of text messages that are being sent out, along with recorded voice messages. Tax scams are becoming so elaborate now that these can often be very convincing. However, HMRC always underlines that it does not ask for personal or financial information in text messages or via calls.
While HMRC has taken measures to prevent scammers from spoofing their own 0300 numbers, and drive scam numbers down as a result, the criminals are still out there. Indeed, they’re trying every possible avenue to get your details, including your favourite social media channels. WhatsApp and Twitter have been targeted by tax scammers, so every online outlet can hide a potential threat.
Ultimately, be vigilant and if it looks or sounds bogus then it probably is.
- Take a look at our roundup of the best tax software for small businesses
