Top 5 Tax Scams You Should Be Aware Of

Tax Professionals' Resource
May 28, 2013 — 1,268 views  
Become a Bronze Member for monthly eNewsletter, articles, and white papers.

Fraudsters rely on different methods to get their hands on the taxpayer’s money. An individual should be vigilant and alert as such scams can completely wash off your tax records. To stay safe from such fraudulent activities, tax payers should have awareness about the different tax scams that are happening around. Tax professionals should educate their clients about these scams. They should also advise them and guide them properly so that they do not fall into any such traps.

Baseless Claims

Many tax companies try to misinterpret the tax policies of the IRS and make baseless claims upon that. By propagating such claims, they prompt the tax payer to hire them. An IRS policy known as “Offer in Compromise” is one such policy which is often twisted by fraudulent tax companies for their personal gains.

The policy actually states that the tax debt of people who qualify for the policy will be reduced to a certain extent. Fraudulent tax companies twist this claim in another way by claiming that they will be able to reduce the tax debt of the client to zero. Many people who do not have any idea about IRS policies are easily lured by these baseless claims and they fall in the trap of such companies. To avoid such issues, you should be updated on the IRS schemes and policies, and should also check the authenticity of a company before opting for their services.

Phishing

Phishing is another scam which tax payers usually fall prey to. Here, unsolicited emails that contain links are sent to random people. The emails will be usually in the name of the bank in which the person has an account and will have the subject like “urgent tax update”. The links will lead to fake websites, which try to obtain personal and financial information from the user. Such information will then be used by the scammers to steal money from the banks and claim illegal refunds. This is a common scam and taxpayers should avoid opening such emails or clicking on unnecessary links, so as to avert troubles.

Preparer Fraud

In this type of tax scam, tax preparers misuse the details regarding their clients in order to claim large amounts as refunds and to charge exorbitant fees. To prevent such an occurrence, check the Preparer Tax Identification number of the particular tax payer before hiring him/her. This number is to be entered on every return that is filed by that particular preparer. This will help the IRS to keep track, in case a fraud occurs.

Identity Theft

Identity theft is another usually occurring tax scam. Here, the scammers will pose as a reputed financial institution, and will try to obtain details like social security numbers, bank accounts, and other such details. This information will be then used to file false returns on the behalf of a tax payer. To prevent this you should take care to never share your confidential details with a third party.

Unreasonable Arguments

When one hires the services of a fraudulent tax service, you will lose money in more than one way. The agency will put frivolous and unreasonable arguments for your tax claims which will be downright rejected by the IRS. This whole process of filing unreasonable claims and rejecting them will go on and on. The only agency to be benefited from such a deal is the tax agency, as you will end up losing a whole lot of money to them as fees and expenses. The only way out of such a situation is to do your homework before hiring a tax service.

Tax Professionals' Resource