3 Tax Scams You Need to Watch Out For

Becoming a victim of tax scam

According to the Internal Revenue Service (IRS), there was a 400% increase in phishing and malware incidents during the 2016 tax season. And tax scams extend far beyond email and malware to include phone scams, identity theft and more.  While the April 15 filing deadline still feels far away, as Yogi Berra said, “It ain’t over till it’s over.”

Scammers use multiple ploys and tactics to lure unsuspecting victims in. The IRS publishes an annual “Dirty Dozen” list of tax scams. Sadly, while some of those scams lure people into getting ripped off, others lure people into unwittingly committing tax fraud by falling victim to fake charities, shady tax preparers and false claims on their tax returns.

The most important things you can do to keep yourself scam-free and protected this—and any—tax year are to:

  • Be wary—if it seems too good to be true, it probably is
  • Educate yourself on the most common risks out there
  • File your taxes as early as possible

When you file your taxes as early as possible, you can just politely decline scammer and you can protect yourself from taxpayer identity theft. Tax-related identity theft is primarily aimed at someone posing as you stealing your tax refund. Scammers are creative, sophisticated, persistent and move fast once they have your information in hand. Armed with your Social Security number, date of birth and other pieces of your personally-identifiable information, they can rob you. If you’ve been the victim of a data breach—learn the warning signs—your information is likely available on the dark web. With your information, all a scam artist has to do is log in to a motel’s Wi-Fi network, fill out a fraudulent tax return online and walk away with a refund that could be and should have been yours.

What Is a Tax Scam?

A tax scam is a ploy intended to steal your information and/or your money. It can take several forms. The IRS’s “Dirty Dozen” for 2018 includes these scams:

  • Phishing scams, using fake emails or websites to steal personal information.
  • Phone scams where callers pretend to be IRS agents to steal your information or money.
  • Identity theft scams where identity thieves try and steal your personally identifiable information.
  • Return preparer fraud where a dishonest tax preparer submits a fraudulent return for you or steals your identity.
  • Fake charities where unqualified groups get you to donate money that isn’t actually deductible on your tax return.
  • Inflated refund claim scams where a dishonest tax preparer promises a high refund.
  • Excessive claims for business credits where you or a dishonest tax preparer promises a high refund for claiming credits you aren’t owed, such as the full tax credit.
  • Falsely padding deductions Taxpayers where you or a dishonest tax prepare reports more for expenses or deductions than really occurred.
  • Falsifying income to claim credits where a dishonest tax preparer cons you into claiming income you didn’t earn in order to qualify for tax credits, such as the Earned Income Tax Credit.
  • Frivolous tax arguments where a scam artist gets you to make fake claims to avoid paying taxes.
  • Abusive tax shelters where a scammer sells you on a shelter as a way to avoid paying taxes.
  • Offshore tax avoidance where a scammer convinces you to put your money offshore to hide it as a source of taxable income that you have to pay taxes on.

It’s important to know that if you fall victim, you may not just be the victim. You may also be a criminal and held accountable legally and financially for filing an incorrect return.

A new scam recently hit the wires too. For this one, scammers email employees asking for copies of their W-2s. People who fall victim end up having their names, addresses, Social Security numbers and income sold online. The emails look very valid but aren’t If you see this or other emails that stink like “phish,” email the IRS at phishing@irs.gov

1. Phishing

Phishing uses a fake email or website to get you to share your personally-identifiable information. They often look valid. Know that the IRS will never contact you by email regarding your tax return or bill.

Phishing emails take many forms. They typically target getting enough of your personally identifiable information to commit fraud in your name, making you a victim of identity theft if you take the bait.

Phishing emails may also contain a link that places malware on your computer. These programs can do a variety of things—none of them good—ranging from recruiting your machine into a botnet distributed denial of service (DDoS) attack to placing a keystroke recorder on your computer to access bank, credit union, credit card and brokerage accounts to gathering all the personally identifiable information on your hard drive.

Here’s what you need to know: The IRS will never send you an email to initiate any business with you. Did you hear that? NEVER. If you receive an email from the IRS, delete it. End of story. Oh, and it will never initiate contact by way of phone call either.

That said, there are other sources of email that may have the look and feel of a legitimate communication that are tied to other kinds of tax scams and fraudulent refunds. And not all scams are emailed though. A lot of scammers will call. The IRS offers 5 way to identify tax scam phone calls.

2. Criminal Tax Preparation Scams

Not all tax professionals are the same and you must vet anyone you’re thinking about using well before handing over a shred of your personally identifying information. Get at least three references and check online if there are any reviews before calling them. Also, consider using the Better Business Bureau to see if the preparer has any complaints against them.

Here’s why: At tax-prep time, offices that are actually fronts for criminal identity theft pop up around the country in strip malls and other properties and then promptly disappear a few days later. Make sure the one you choose is legit!

3. Shady Tax Preparation

Phishing emails aren’t always aimed at stealing your personally identifiable information or planting malware on your computer. They may be simply aimed at getting your attention and business through enticing—and fraudulent—offers of a really big tax refund. While these tax preparers may get you a big refund, it could well be based on false information.

Be on the lookout for questions about business expenses that you didn’t make, especially watching out for signals from your tax preparer that you’re giving him or her a figure that is “too low.”

If you are using a preparer and something doesn’t seem right, ask questions—either directly from the preparer or by calling the IRS. The IRS operates the Tax Payer Advocate Service that can help answer your requests. The service’s phone may be unavailable during a government shutdown, but the website is always available.

Other soft-cons of shady tax preparation include inflated deductions, claiming tax credits that you’re not entitled to and declaring charitable donations you didn’t make. Bottom line: If you cheat—intentionally or unintentionally—chances are you’ll get caught. So make sure you play by the rules and follow the instructions or work with a preparer who does. Yes, the instructions are complicated. That’s why it’s not a bad idea to get honest help if you need it.

As Yogi Berra said, “You can observe a lot by watching.” Tax season is stressful without the threat of tax-related identity theft and other scams. It’s important to be vigilant, because, to quote Yogi all over again, “If the world were perfect, it wouldn’t be.”

This article was originally published February 28, 2017, and has been updated by a different author.

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Financial Scams That Target the Elderly and How to Prevent Them

financial scam targets elderly

A 2015 study found that older adults lose more than $36 billion every year to financial scams. Unfortunately, con artists see the elderly population as an easy and vulnerable target.

The American Securities Administrators Association’s President, Mike Rothman, explains that scammers take this approach because the current elderly population is one of the wealthiest we’ve seen with such hefty retirement savings. Where the money goes, the con artists follow.

With so many scams targeting older adults, it’s essential to make yourself and your loved ones aware of the different types of cons. Here is a list of common financial scams that specifically target the elderly and how you can prevent them:

The Grandparent Scam

The grandparent scam is common because it appeals to older adults’ emotions. Scammers get the phone number of a senior and they call pretending to be a grandchild. Making their lie seem more believable, the con artist will playfully ask the older adult to guess what grandchild is calling. Of course, the first reaction will most likely be for the senior to name a grandchild and then the scammer can easily play along, acting like they guessed right. Now the grandparent thinks they are talking to their grandchild.

The scam artist will then begin to confide in the grandparent, saying they are in a tough financial position and they need the grandparent’s help. Asking them to send money to a Western Union or MoneyGram, they plead for the grandparent not to tell anyone. If the grandparent complies and sends the money, the scammer will likely contact the senior again and ask for more money.

Avoid this scam:

  • Never send money to anyone unless you have 100 percent proof that it is who you think it is. Scammers can find out quite a bit of information from social media and other methods, so don’t think that just because they know a couple pieces of information about you and your family that it is legit.
  • Verify that it is actually your grandchild on the phone by texting or calling the grandchild’s real phone number and verifying if it is him or her.
  • Call the parent of the supposed grandchild and find out if the grandchild really is in trouble.
  • Talk to your family members now and compile a list of questions only you and your family know the answers to. If a family emergency really does happen, you can ask the questions and know if it is your family member based on the answers.

“Claim Your Prize Now!” Sweepstakes Scam

The sweepstakes scam is when con artists contact the elderly either by phone or email and tell them they have won something, whether that be a sum of money or another type of prize. To claim the prize, scammers tell them they have to pay a fee. Once the senior agrees, scammers send a fake check in the mail. Before the check doesn’t clear and seniors can realize it is a scam, they have already paid the “fee.”

Avoid this scam:

  • Do not give out any financial information over the phone or email.
  • Practice Internet safety by protecting your passwords, shopping on encrypted websites, and avoiding phony emails.
  • Be skeptical of any message that says you have randomly won a prize and you must do something before you can claim it. Unless you specifically enter a contest, you most likely aren’t going to randomly win a monetary prize.

Medicare Scam

Because of the Affordable Care Act that allows seniors over the age of 65 to qualify for Medicare, scam artists don’t have to do much research about seniors’ healthcare providers. This makes it simple for scammers to call, email, or even visit seniors’ homes personally and claim to be a Medicare representative.

 

There are a variety of ways these con artists use this Medicare scam to target the elderly. One way is telling seniors they need a new Medicare card and to do so, they need to tell the “Medicare representative” what their Social Security number is. An additional way is they can tell seniors there is a fee they need to pay to continue their benefits.

Avoid this scam:

  • Do not give out any information to someone you have not verified is from Medicare. Real Medicare employees should have your information on file so if you are skeptical, ask the person some questions to verify it is legitimate.

The “Woodchuck” Scam

A common scam to target seniors who live alone is the “woodchuck” scam. Scam artists will claim to be contractors and will complete house projects if seniors agree to let them.

The scammers will gain seniors’ trust and eventually come up with a variety of fake repairs that need to be done, such as a roof repair. This often results in seniors giving the fake contractors thousands of dollars.

 Avoid this scam:

  • Make sure the person doing your home repairs is a professional. Find out what company they work for and call and verify they are indeed a legitimate contractor.

Mortgage Scam

Con artists are using senior homeownership to their benefit. The mortgage scam is when scammers offer a property assessment to seniors, telling them they can determine the value of their home. This scam has become increasing popular as housing confidence is hitting record highs and people are putting a large chunk of their income towards saving for new homes.

The scam artists make the process look legitimate by finding the home’s information on the Internet and sending seniors an official letter detailing all of the found information. The scammers do this because it is an easy way to con seniors into paying a fee for the requested information.

 Avoid this scam:

  • Ensure the property assessment is legitimate by asking what company they work for and following up with the real company to verify.

Talk to Your Loved Ones

Older adults are often too embarrassed to tell authorities or a family member they have been scammed. Talk to the seniors in your life and let them know they can confide in you and let you know if they have been scammed. You can also have them read through this article and make themselves aware of the scams that could potentially target them in the future.

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