EXECUTIVE SUMMARY:

Cyber scammers love tax season. Emotions run high and it’s easy for scammers to prey on FUD (fear, uncertainty and doubt). In the U.S., almost everyone is petrified (and peeved) by the tax system’s complexity, discouraged by deceptive tax service providers, and perpetually uncertain about their calculations.

Then of course, there’s also the possibility of owing a significant bill, of failing to receive funds, or of the inability to submit taxes on-time due to technological failures. Given the anxiety-ridden and sometimes grueling nature of the tax return process, cyber scammers have a field day preying on people.

Whether you’ve been filing taxes for just five years or for fifty years, anyone can fall victim to a tax season scam. This year, take care. Memorize the techniques employed in the most subtle and insidious scams and don’t forget to share insights with colleagues, family and friends:

IRS impersonation scams

1. Phone calls from the IRS. Scammers can spoof the IRS phone number, leading targets to believe that the IRS is on the line; that a legitimate IRS agent has a message for them.

Because no upstanding citizen wishes to deliberately flout the law or to ignore a call from an official agency, people are prone to providing ‘IRS agents’ with personal information — especially social security numbers.

2. Emails impersonating the IRS. Scammers send zillions of fake emails to people that appear to be from the IRS. Emails may display the IRS logo and otherwise look official. These emails ask for personal information or instruct people to input personal data into fake websites.

3. Account set-up assistance scams. Scammers sometimes chase vulnerable populations (the elderly, the differently-abled, the very young) to offer assistance with online account set-up. If you need assistance setting up an online account, contact the IRS directly.

Tax professional scams

4. Ghost tax preparers. Fraudulent tax preparers sometimes promise significant rebates or huge tax returns. However, their practices are illegal.

5. ‘I’ll help you negotiate a settlement’. Scammers may pose as helpful negotiators who can expeditiously resolve tax issues. Individuals who face mountains of debt may be tempted to talk to anyone who can ease the burden. While some scammers will prepare taxes for individuals, the red flag is that they won’t sign the taxes. Legitimate service providers will.

High-income filer scams

6. Charitable remainder annuity trust (CRAT) scams. These scams promise to eliminate ordinary income or capital gains tax on property sales. In essence, high-income individuals transfer assets into a trust, receive annuity payments and specify a charity as the ultimate beneficiary. While created as an altruistic mechanism for sharing wealth, scammers can manipulate situations and lead people to use CRATs as tax shelters.

7. Monetized installment sales scams. In these scams, fraudsters sell assets and assist individuals in deferring capital gains taxes. Legal grey areas are exploited and deals are structured in such a way as to fit the dictionary definition of tax evasion.

8. Captive insurance arrangements. High-income earners sometimes seek to reduce tax liability by developing their own insurance companies (captives). These are intended to insure risks related to a business, but there are ways in which scammers can abuse this structure for their own gain.

General scams

  9. Tax refund accelerator scams. To execute these scams, fraudsters send personalized emails or share website details about a special service that promises to expedite the tax refund process, ensuring that consumers receive money faster than average.

Scammers manipulate people by emphasizing that the service is exclusive and only available for a limited length of time. Once victims provide personal details, the scammers disappear.

10. Unexpected calls from the Taxpayer Advocate Service. Although the Taxpayer Advocate Service is a legitimate IRS program, scammers may impersonate the group in order to gain a potential victim’s trust (and ultimately, their data, which can be used for multiple types of theft).

Another subtle sign of fraud…

Should you receive a notice about a “duplicate tax return” or a notice stating that additional taxes are owed, contact the IRS directly.

If you think that you’ve fallen for a tax scam…

If you think that you’ve become the victim of a tax scam in the U.S, reach out to the IRS immediately and report the scam to the Better Business Bureau.

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