If there’s anything more inevitable in life than death and taxes, it’s scams. Tax scams are nothing new, but scammers are always coming up with different strategies to take advantage of taxpayers. No matter what time of the year it is, taxpayers need to stay vigilant to avoid falling prey to tax scams. Below are some tax scams that you may not have heard of, but could affect you.
The coronavirus pandemic isn’t making headlines like it used to, but the virus is still infecting many people. So it’s not farfetched to think that the federal (or state) government might still be offering and administering coronavirus-related tax benefits to eligible citizens.
For example, someone might call you claiming to be from the U.S. Department of the Treasure telling you that they want to help you apply for stimulus payments or grants. The only thing you have to do is pay an advanced fee and/or provide personal information. But this is a scam, and the only assistance these scammers want to provide is relieving you of your money.
Advance Fee Scams
An advance-fee scam is where someone promises you a benefit, but only on the condition that you first send them payment in advance. This payment can take almost any form, from wiring money to mailing a gift card to providing credit card information. Depending on the scam, this advanced fee could be required to “process” your benefits or prepay your “taxes” relating to the benefits received.
You can avoid these scams by remembering two things. First, if it sounds too good to be true, it probably is. Second, the vast majority of legitimate benefits from the government or a private entity will not require a prepayment.
Fraudulent Tax Advice
This is a sneaky type of scam because the scammer isn’t trying to steal your identity or take your money for nothing. Instead, they will often provide an actual service, such as preparing tax returns or handling other tax matters on your behalf. However, their tax advice and services will either be completely bogus or overly aggressive.
For example, a tax preparer might promise a minimum amount of money for your tax refund. All they ask for is a reasonable tax preparation fee. You decide to have this person prepare your taxes and you pay them their fee. But you never get your promised tax refund. Either they never filed a return on your behalf or the return they filed was filed with incorrect information.
If the tax professional is overly aggressive, they might suggest you use a particular tax avoidance strategy, such as an abusive syndicated conservation easement. This scam involves the scammer relying on an actual law dealing with conservation easements, but then using fraudulent appraisals and false business claims. This results in improperly inflated tax deductions and the tax professional charging you a fee for their “services.” To add insult to injury, the IRS will likely audit these tax claims.
If you think someone is trying to scam you, you should report the possible scammer. You have several options to do so, depending on the type of scam:
- Tax Inspector General for Tax Administration
- FTC Complaint Assistant
- FBI Internet Crime Complaint Center IC3
The good news is Kienitz Tax Law is here to help you with your tax issues. Schedule your FREE consultation today!