Tax Fraud during the Tax Season

Last updated on March 20, 2023

Cases of tax fraud increase drastically during tax season, when taxpayers around the country prepare and file their tax returns. In order to obtain a fraudulent tax refund, tax scammers steal the identity of taxpayers, coerce them into falsifying information on tax returns, and/or trick them into filing erroneous tax returns. It is, therefore, during tax season that taxpayers must stay alert and ensure that they file their tax returns accurately.

Identity Theft Tax Fraud

For the third consecutive year, identity theft has topped the IRS Dirty Dozen Tax Scams list. Identity thieves steal information used on tax returns such as Social Security Number, and personal information such as filing status and legal name, to file false tax returns on the behalf of the taxpayer to claim large refunds. As identity theft is a crime that can be conducted remotely, it is relatively easy to carry out and does not involve violence. This has made it widespread and difficult to curb.

To protect yourself from identity theft, you need to be careful when sharing your tax, personal and financial information with others. Identity thieves use the name of reputed institutions, including the IRS, to dupe taxpayers into sharing sensitive tax information. Filing tax returns early and keeping tax information safe will ensure protection from identity theft.

Fraud by Tax Preparers

After the IRS initiated the use of the Personal Tax Identification Number (PTIN) for all tax preparers filing returns, tax preparer fraud has decreased, but taxpayers must ensure for their safety that the tax preparer that they hire is legitimate. Checking the history of the tax preparer, researching for facts and asking for the PTIN can give a good idea of how honest and competent a tax preparer is.

Before filing, make sure that you sign the return and review the form one last time. Do not sign a blank form and leave it to be prepared by your tax preparer. A little carefulness on your part can save you from becoming a victim of a tax scam.

Tax Fraud through Telephone Scams

Recently, the IRS has noticed an increase in the number of local phone scams where the callers pretend to be from the IRS to steal the identity or money from taxpayers. This scam has popped up across the country.

Pretending to be the IRS, the callers threaten arrest and legal action or intimidate the taxpayer with other means to get money in cash or pre-paid cards or to get the taxpayer’s filing information. Many times, these scam callers follow-up their call with other calls pretending to be from the state motor vehicle department or the local police. They usually work in a team. These scams tend to target certain vulnerable communities, such as single women, immigrants and the elderly.