It’s tax time which means that the tax scammers are out in force. These scammers are good at what they do and use a variety of tactics and threats to either obtain your sensitive information, such as your Social Security number and credit card numbers, or they’re just out to steal your money. Either way, the damage they can cause can be substantial and that is why it is important to protect yourself.
When it comes to taxes, you should always be cautious as to who you turn your tax information over to. Remember that there is a lot of sensitive information on your tax forms. That is why it is important that if someone other than yourself prepares your return, you use someone who is reputable and understands the importance of protecting your sensitive information. In fact, before you retain a preparer, I think one question you should ask is what they do to protect your sensitive information. If they don’t give you an adequate answer, it probably means you should look for a new preparer. Every year more and more people have their sensitive information compromised because of tax preparers. It may not be the tax preparer that is stealing your information, it may be their staff, but for you the results are the same. Therefore, make sure you discuss how your information will be protected with any potential preparer.
One tax scam that has continued to grow over the last number of years is where the scammers contact you by phone claiming they are from the IRS and that if you do not make an immediate payment you will be arrested. What makes this scam so effective is that when you look at the caller ID it says IRS. That being said, you should know that you are not going to get a call out of the blue from the IRS. That is not how the IRS operates. Therefore, if you get a call and the caller ID says Internal Revenue Service or IRS, my advice: don’t take the call. If the IRS has an issue with you, they will contact you through the U.S. mail. Your initial contact with the IRS is never going to be by phone. Therefore, don’t fall for this scam and don’t try to outfox the scammers; they are very good at what they do. Ignoring them is by far the best course of action.
Another scam that has grown over the last few years is where the scammers actually file a tax return on your behalf. Typically, you only find out about this when you file your return seeking a refund, and it is rejected by the IRS. Unfortunately, there is very little that you can do to prevent this. One way you can reduce this risk is to file your return as soon as possible. Therefore, if you have all the information you need to file your return; the sooner you do it the better.
If you file your return and you find that it is rejected by the IRS, you need to immediately contact the IRS. They are very experienced with this issue, and as far as I’m concerned, they are the best ones to resolve it.
Every year I hear about new tax scams. Some of them sound very legit, while others have you scratching your head and saying who would fall for this. There is no 100 percent way to protect yourself, but by taking precautions, asking questions and checking things out independently, you can dramatically reduce your risk. The more speed bumps you can put in front of the scammers, the better it will be for you.
Good luck!
Rick is a fee-only financial advisor. If you would like Rick to respond to your questions, please email Rick at rick@bloomassetmanagement.com.