There’s one thing we all have in common this time of year: none of us look forward to dealing with tax season. Unfortunately, while we can be tempted by shortcuts we see online or on TV, these often come with the chance of being a scam. Unintentionally or not, there are huge potential consequences for cheating on your taxes. How can you make sure you avoid doing so this year? Look out for the scams below and breeze through this tax season with ease.
1) Phishing: While we can laugh off emails saying we’ve won the lottery in Spain or can buy an iPhone 5 for $20, it gets a little scarier when phishing emails circulate that are supposedly from the IRS. But here’s a heads up: the IRS will never contact you by email, text message or social media, especially when asking for personal information. If you do receive a request for personal info that states it’s from the IRS, forward it here (email@example.com) and do not respond.
2) Fishy Accountants: If you’re having a pro help you with your taxes, make sure they have the proper credentials and licenses. Some preparers have been known to fudge numbers or fake information to boost your refund and ask for a cut. Just say no – in the end, you’re always responsible for your return and will be the one busted if you’re not playing by the rules.
3) Fuzzy Math: People cheat on taxes for a lot of reasons; they are tempted year after year to inflate their donations to charities and other deductions to increase their return. Between October and December last year alone, the IRS investigated 1,300 people for tax fraud, with 85% of those landing in prison for 4 years or more. While criminal charges are more serious than inflating a deduction or two, honesty is always the best policy.
4) Offshore Income: Some people reason that money the IRS doesn't know about is money they don't have to pay taxes on. So they try to hide it abroad by using foreign accounts and credit cards, wire transfers, international trusts, insurance plans, and other vehicles. Otherwise known as tax evasion, this is a more serious tax scam and can land perpetrators in prison for five years or more.
5) False Forms: Some people use countless forms to claim credits they aren't eligible for, either through ignorance, deceit or on the advice of an unscrupulous preparer. Says the IRS, "One version of the scheme is based on the bogus theory that the federal government maintains secret accounts for its citizens and that taxpayers can gain access to funds in those accounts by issuing 1099-OID forms to their creditors, including the IRS." If a preparer recommends you fill out a form you are unfamiliar with, do a little research and check the IRS site (www.irs.gov) before doing so.
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