According to the Federal Trade Commission’s 2019 Consumer Sentinel Network data, one in three Americans aged 20 to 29 reported losing money to tax fraud in 2018. A mere 13 per cent of the small businesses in this range also reported losses due to fraud. According to the IRS, victims of tax scams have lost more than $23 million since 2013.
Identity theft is the most frequently reported form of tax fraud. Here are four of the most typical tax-related scams, along with tips on avoiding becoming a victim.
1. Tax Identity Theft
This typically occurs when a fraudster obtains an IRS refund by using your information before you have even filed your taxes. Criminals steal your personal information, including your Social Security number, to use it to submit a false tax return. This usually happens early in the tax season. Fraudsters may even try to get a refund by using a deceased taxpayer’s information.
When someone obtains your social security number and works without paying taxes, you could see a variation of this play out. It’s typical for someone to list your offspring as dependents, which is a form of tax identity fraud.
Low-tech identity theft is a common form of crime. Your social security number is the first step in the process of identity theft. An easy way to get your personal information stolen is to lose your wallet or phone, both of which include sensitive information. You should keep your social security card at home and make careful to secure your phone. Avoid storing critical data on your devices if possible.
2. Deceitful Tax Preparers
Some dishonest tax preparers are out there, but not all are fraudulent. Frauds perpetrated by these people might take several different forms. Unscrupulous tax preparers may use fraudulent information to inflate a refund, while others may try to acquire your personal information from tax records.
Make sure you’re working with a trustworthy organization and a reputable service provider when you’re seeking help with your taxes. You may find a certified tax preparer’s Tax Preparer Identification Number (TPIN) on the IRS website. Check out Yelp and the Better Business Bureau for verifiable customer reviews.
Phishing, which involves obtaining personal information through phony emails, adverts, or websites, occurs yearly. Hackers typically send what’s known as a phishing email, which imitates an email from a retailer, corporation, or friend and includes a link to a fake site asking for personal information.
Protect your personal information from identity thieves by storing your tax documents in a secure location. When filing your taxes online, use a secure connection to protect your personal information. Take your paper tax return to the post office and drop it off there if you’re filing on paper. No one will be able to take your tax forms, which include a great deal of private information, from your mailbox this way.
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