When it comes to scams, they’re almost as inevitable as taxes. The only thing that changes is how the scams work. As taxpayers catch on to existing tax scams, con people look for different ways to trick their victims. Below we identify two of the newer tax scams that many taxpayers may not have seen before.
As if scamming money from a victim wasn’t bad enough, some scammers take advantage of taxpayers’ generosity. They do this by requesting “donations” that are not tax deductible yet claim they are. Not only does the fake charity steal money from the taxpayer, but they often are able to obtain sensitive personal information from the taxpayer as well.
Then to add insult to injury, many taxpayers don’t find out they’ve been scammed by a fake charity until they file their taxes. That’s when they get hit with an audit or notice from the IRS that a specific donation they made wasn’t tax deductible after all. There are a few things taxpayers can do to avoid falling prey to this type of scam:
- Double check charities with names that sound similar to well-known charities.
- Whenever making a donation, avoid providing personal information, such as online account passwords or social security numbers.
- Make the donation using a traceable method, such as a credit card or check; don’t use cash.
- Be extra vigilant after a publicized disaster or tragedy.
- To make sure a charitable donation is tax exempt, use the IRS’ Tax Exempt Organization Search tool.
Overly Aggressive Tax Strategies
This is a clever tax scam in that it’s unconventional in how it works. Instead of trying to trick a taxpayer into providing personal information, stealing a taxpayer’s identity or convincing a taxpayer to send money to the scam artist, this strategy focuses on the need for tax planning advice.
Most people want to pay as little tax as possible, so some unscrupulous individuals work on stealing money from taxpayers through the tax advice process. They entice new customers by promising guaranteed refund checks of a certain amount or special tax strategies that can supposedly save taxpayers tons of money.
The tax “professional” gives advice and may even prepare the return. But they do so in a way they know is abusive and is likely to end up with the IRS rejecting the use of the various tax strategies. However, by the time the taxpayer figures out their tax professional didn’t provide sound tax advice, they’ve already paid them and the tax professional is nowhere to be found.
One way to avoid falling victim to this scam is for taxpayers to second guess any tax advice that seems too good to be true. Taxpayers can also ask for references of a tax professional they intend to hire, but wonder if they’re really as good as they seem. Finally, the taxpayer can ask for the tax professional’s IRS Preparer Tax Identification Number (PTIN). Legitimate paid tax return preparers are required to have one after registering with the IRS and must include it on the tax returns they prepare.