Tax Time Scams

Last updated on June 29, 2012

Tax time is when tax frauds become most active. Tax time scams reach the peak when most taxpayers file their tax returns. With many taxpayers expecting refunds, scammers use the façade of the IRS or a reputed agency to extract sensitive financial and personal information from taxpayers which they use to claim inflated refunds by filing false tax returns.

Tax Scams through Identity Theft

Taxpayers who share their personal and financial information online are most vulnerable to online scammers. Any unsolicited email asking you to share your credit card information, social security number, date of birth, copy of driver’s license, passwords and pin codes should be checked thoroughly for phishing. Online tax scams are mostly carried out through phishing.

Tax Refund Scams

Sometimes taxpayers file false tax returns to get an inflated refund, but many times tax professionals file false tax returns on behalf of their clients without their knowledge. The IRS received 2.2 million fraudulent tax returns in 2011. Out of these 940,000 were cases of identity theft. Before choosing a tax preparer to file tax returns on your behalf, check their credentials and background.

The number of tax scams is ever on the rise. Last year, more than 640,000 taxpayers were affected by tax scams, which is double the number of the year before. IRSs fraud detection system spotted more than one million potentially fraudulent returns this year.

Whether online or offline, falling a victim to tax scams spell trouble for taxpayers because they get into trouble with the IRS. Filing an amended return is a way out, but most taxpayers stay unaware of the fraud till the money has gone. Therefore, it is important for taxpayers to ensure the authenticity and sincerity of any source they choose to share their financial information with so that they can breeze through another safe tax season.