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Tax Scams 2020: A Comprehensive Guide

tax scam guide

In 2018, the IRS had 649,000 confirmed cases of fraudulent tax returns from scammers trying to steal over $3 billion in tax refunds.

There are a lot of new and old ways being used to trick taxpayers and tax preparers alike. Like fake emails and phone calls, or even holding important documents they’ve stolen up for ransom. But the IRS is doing everything they can to protect taxpayer’s personal information and weed out scammers.

Protecting your information and important documents is the key to avoiding tax scams. Knowing a thing or two about what tax scammers are doing and how they’re doing it can also help you spot a scammer before you get taken advantage of.

Explore this Article

What are Tax Scams?

A tax scam is when someone uses tax season to steal private information. Many tax scams try and steal your personal information so they can file your taxes before you do, and claim your tax refund for themselves.

How to Tell if Something is a Scam

There’s not a worse feeling in the world than getting fooled by a scammer. Avoid letting this happen to you by first understanding what scammers want. They want to get you to pay for fraudulent services or they want your personal information. Second, learn to recognize the characteristics of a scam before it tricks you.

  • They will try and make you panic
  • They will try and get you to download something
  • They will try and get you to click on links
  • They will want you to pay in prepaid debit cards, gift cards, or wire transfers
  • They will demand immediate action and try to rush you
  • Their site won’t be secure
  • They will contact you in a way that the IRS won’t, like through emails, phone calls, or texts
  • Their promises will sound (and be) too good to be true

Common Tax Scams

The official website of the IRS is a great place to go for information and resources about tax scams. This year the IRS published a list of tax scams they call the “Dirty Dozen.” Here’s a brief recap of the tax scams you’ll want to look out for and what you should do if one of these tax scams hit you.

1. Berkheimer Tax Innovations Scam

Berkheimer Tax Administrator Services is an example of taxpayers receiving concerning letters in the mail about their taxes. They are one tax preparation company that has received a lot of flax for less than ideal business practices. Many of their customers have complained to the Better Business Bureau about receiving strange letters saying they owed delinquent taxes and asking for payment.

Be careful where you choose to file your taxes. When researching tax service providers you can always check their status on the Better Business Bureau’s website to make sure you aren’t falling prey to a scammy or fraudulent company.

2. IRS Tax Scam

Some tax scams will try and pretend they are the IRS in order to get you to pay them or give them information. This is also called phishing.

Phishing is when a tax scammer sends out emails or even creates a fake website to trick people into thinking they are the IRS. But the IRS directly states on their official website that they “will never initiate contact with taxpayers via email about a bill or tax refund.”

So if you receive an email claiming to be from the IRS, you can immediately know it’s a scam and report it. Do not click on any links or respond to any emails claiming to be from the IRS. By interacting with a fake email from the IRS you can jeopardize your computer and your personal information.

The IRS directly states on their official website that they will never do the following:

  • The IRS will not call you demanding immediate payment through a prepaid debit card, gift card, or wire transfer. If you do owe the IRS money, they will first mail you a bill, and you will never pay the IRS through prepaid debit cards, gift cards, or wire transfers. Scammers like to use these forms of payment because they are difficult to track.
  • The IRS will never threaten to have you arrested.
  • The IRS will never demand payment without allowing you to question or appeal what you owe.
  • The IRS will never ask you to give them your credit or debit card numbers over the phone.
  • The IRS will never suddenly call you about an unexpected refund for you.
3. Tax Evasion Scam

There are several forms of Tax evasion scams you should be aware of. These types of scams will try and sell programs to help you avoid paying taxes.

Offshore Tax Avoidance

One tax scam is to try and hide income offshore in order to avoid paying taxes on them. If you’ve been involved in any offshore tax avoidance, the best thing you can do is voluntarily catch up on your taxes to make things right.

Frivolous Tax Arguments

Some tax scammers will try convincing you to take part in frivolous tax arguments to try and avoid paying taxes. These cases are repeatedly thrown out in court, no matter what the tax scammer might say.

Abusive Tax Shelters

There are people who create complex tax avoidance schemes and then sell them to unsuspecting members of the public. Be aware that there are tax scammers like these, trying to peddle too-good-to-be-true schemes, plans, programs, or shelters.

4. Tax Fraud Scam

Other scammers will try and encourage taxpayers to fake information on their tax return in order to get certain benefits.

Return Preparer Fraud

Be careful when choosing a tax preparer or tax filing service. Make sure the website is secure and that the tax filing service is trustworthy and legitimate. Many scammers will try to pose as tax preparers to get ahold of your precious personal information and documents.

Find an established tax preparer you can trust, like Check City Tax Services, where you can file your taxes in a timely manner and know your documents and personal information are secure.

Inflated Refund Claims
Be careful if you are being promised an inflated tax refund, or if your tax preparer tries to get you to sign a blank return. When promises seem too good to be true, they often are. Trust this instinct and avoid scammers who will try and reel you in by promising larger than life tax refunds.

Falsifying Income to Claim Credits
Never trust a tax preparer that tries to convince you to falsify information on your tax record. All information on your tax return should be accurate. If someone tries to convince you otherwise, like that you received more income than you actually did, they are lying to you. Scams like these will lead you to pay large bills and penalties back to the IRS.

Falsely Padding Deductions on Returns
Again, all the information on your tax returns should be accurate. Do not inflate your deductions or expenses in order to pay less in taxes or get a larger tax refund. If your tax preparer is trying to work this way, then you should move your tax filing business elsewhere.

Fake Charities
Beware of fake charities. Sometimes you can recognize a fake charity because they will try and use similar names to well-known charities in order to confuse you. Donating to a worthy cause is a great thing to do, but not if you don’t take the time to double-check that the charity is real.

Excessive Claims for Business Credits
Be careful not to claim tax credits that you don’t actually qualify for. The fuel tax credit or the research credit are examples of tax credits you more than likely don’t actually qualify for. Make sure you fully understand each tax credit before trying to claim one.

5. Tax Scam Calls

You might receive a phone call from a person claiming to be an IRS agent. These fake IRS agents may even threaten you over the phone with legal action, police arrests, deportation, or license confiscation, but these threats are empty. They are only trying to make you think you are in trouble so that you panic and give them what they want.

If you receive a phone call from someone claiming to be an IRS agent and trying to do any of the following things, you can rest assured it is a scam and feel free to hang up and block that number.

6. Identity Theft

Some criminals will try and use the tax season to steal identities. One of the primary ways that someone can steal your identity is by getting their hands on your social security number or card. Then they can pretend to be you and try to claim your tax refund.

Keep your personal information safe by never revealing your social security number to anyone, and by keeping your social security card in a safe and secure location. It is also a good idea to memorize your social security number so that you don’t need to carry your card in your wallet where it’s more likely to get stolen.

How to Report a Scam

If you come across a Tax scam or fall prey to one, then you’re going to want to know how to report it.

First, fill out a 14039 form and send it into the IRS.

If you have any other questions about how to report any kind of tax scam you can find the information you need on the IRS website, Tax Scams – How to Report Them.

You can also visit the official website of the Office of the Inspector General (OIG) and Social Security Administration.

How Do I Know If I’ve Been Hacked?

One way to know if you’ve been hacked by a tax scammer is when you have trouble filing your taxes. Tax scammers often try and e-file your taxes before you do in order to snag your refund for themselves. You’ll then be unable to e-file your own taxes because the tax scammer already did it.

So if the IRS denies an e-file be wary, it could be a garden-variety error that you can go back and fix, but you should be able to successfully resubmit it if there was just a minor error.

 

Tax scams may seem scary but once you learn to recognize them, you’ll easily avoid being duped. Just be sure to protect your personal information and always be cautious in all your dealings. It’s always better to be overly safe than to wind up being sorry later.


Having a Positive Attitude about Taxes

As tax time comes around again, no doubt you’ve heard a lot of grumbling. Perhaps you’ve done some complaining yourself. But instead of making this year’s taxes a miserable experience, here are a few tips to keep your attitude positive and your spring care-free!

Do Taxes Early

First, the quicker you can get the whole process over with, the better. Putting off taxes makes you think/worry about them longer, drags down your spirits, and results in more last-minute panicking if you run into troubles on April 15th. If you’re not sure how to do your taxes, don’t let that stop you from taking action, seek out a tax professional to help you get them done quickly.

Stay Organized

Another preventative measure is to keep all your financial documents in one place. Don’t let all your receipts, bankbooks, W2 forms, etc., scattered around your home and/or office. If you have everything you need in one place and have kept track of all your finances throughout the year, you should have no problem getting your taxes done quickly and pain-free.

Get Help

If just thinking about doing your taxes stresses you out, consider getting help with your taxes this year. Turn to a parent, a sibling, a neighbor or community organization that is capable and willing to help you out with your taxes. Schools, cities, AARP, and other organizations offer free tax-help to their demographics. See if you qualify for their help. Or, hire a professional tax worker to do them for you.

Accept It

Rather than getting angry or annoyed about having to do taxes again, simply accept it as a part of life. Sometimes that’s all it takes. Just like having to eat to live or sleep to rest, change your attitude to accept taxes as a natural part of life. Once you do, you won’t feel so imposed upon or aggravated. Sure, it is a little unpleasant and troublesome, but hey – it’s life!

Dig Into Your Patriotic Soul

If what bothers you is all that money that’s being taken away from you – stop and think about why those taxes are there. Perhaps some of them don’t make sense to you, but think about the others. You pay taxes to help keep roads nice, to provide neighborhood security, to help kids get a good education, and so on.

Think about all the financial trouble our country is in, and be grateful that you can do something to help out. Try to set aside your anger or disagreements with whatever political battle is going on, and remember that we’re all trying to get through this mess together.

Be Grateful

Be grateful that you have to pay taxes. Why? Because it means you have an income, a home, or whatever else. Some people aren’t lucky enough to have those things. And also remember that you’ll be getting some tax returns! Hooray! Try not to remember that it was taken away from you to begin with, and just think of it as free money for being a good citizen. Sure, it’s just a mind trick – but for lots of people, it works!

If you have any other ideas for making tax season a little easier, share with us below!

How to do Your Taxes if You Never Received Your W2

Taxes are a headache for most people, but when you are one of the unlucky Americans who will not receive their Form W-2 this year from their employer then taxes can become an unbearable migraine. While dealing with a missing W-2 will be more difficult than if your employer sent it out like they were supposed to, it does not mean that tax evasion or giving up on your return this year are your only options.

Not Sure? Go Ask!

There are multiple avenues for people in your situation to pursue to file taxes legally and eventually receive the long awaited tax return. Frist and foremost, if you are worried that your employer has not sent out your W-2, go ask.
Head down to your employer’s payroll office or ask for contact information to the payroll office if such things are outsourced by your company, and request that they send you your W-2. Chances are that they are simply late getting the forms in the mail or they have the wrong address on your record.

Check the Address

Be sure to inform them of your current address or an address you will be able to safely receive the form in the mail and if they have already sent out your W-2 to an old or incorrect address you may have to do some hunting. Simply go to the address where they sent the W-2 and ask if the current residents have spotted it in the mail; because, more often than not, when people see the words “important tax information enclosed” and it is not addressed to them they are smart enough and kind enough to hold on to it or return it to the sender.

Filing Tax Returns Without a W-2

So, here is the scenario: you have done all you can on your end to get your employer to send a replacement W-2 (or maybe just the original form if they are super late in getting them out), and you still do not have the form, which means you cannot file for a return, which means you will not get a return. Are you simply stuck at this point? NO!

Should all else fail and traditional methods of receiving your W-2 from your employer have bombed (i.e. they are no longer in business, have filed bankruptcy, or simply are not getting you your tax forms to you) then there are still actions you can take. First, alert the IRS that you have not been able to receive your W-2 and they will walk you through the process of how to proceed (along with sending your employer a friendly reminder from the federal government to get with the program); to do this you will need information from your last paystub including your wages, deducted taxes, Social Security and Medicare taxes paid from your earnings, your company’s name, address, and employer identification number.

The IRS will also send you a Form 4852, which is a substitute for Form W-2 and will allow you to file your tax return even without the standard W-2. If contacting the IRS about your problem becomes itself a major issue (as contacting any federal agency can be pain) then you can go straight to the IRS website and download Form 4852 for yourself.

When filling out a 4852 you will need all the information that would have been on your W-2, generally found on old paystubs, as well as additional information outlining why you are filing with a 4852 instead of a W-2. While the entire process is made easier with a W-2 in hand, those who find themselves stuck without their W-2 still have options. To learn more about how to deal with a missing W-2, contact your local tax experts at Check City.

Staying Organized for Tax Season

As the time to file your taxes grows nearer and nearer, you should make sure that you file your taxes quickly.  Take time to file your taxes early so that you can be sure you can find the money that you need to pay the taxes that you owe.  If you do not owe any taxes, you will simply be able to get your tax return back faster.

 

When you are looking for someone to file your taxes, stop by Check City and take advantage of our tax services. You can be sure that you are going to be able to have your taxes filed quickly and properly.  If you come in for a tax services appointment you want to make sure that you have all of the proper paperwork for your tax services.

 

If you have already finished your taxes, you may want to start getting ready for next year’s tax season.  You can do this by getting all of your financial paperwork organized and sticking with the organization system that you have set up for your paperwork.

 

You want to make sure that you are putting any paperwork away quickly and in the right spot.  This way, you can be sure that you are going to have the paperwork that you need when you come in next year for your tax services appointment.

 

Each year you should take note of the most stressful part of filing your taxes.  Then, find a way to make sure that you are able to avoid those problems the next year.  Eventually, you will find that your taxes are a breeze and you are able to get them done quickly and confidently.

 

Your tax season does not have to be stressful. Just learn to be organized and prepared and you can be sure that you are able to enjoy the first few months of your new year.

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