Tax Scams Overview
02/28/2024
Tax Scams Overview
It’s tax season again, and many of the same tax scams will be popping up as Americans begin filing. Here is a helpful overview of some of the most common tax scams as well as some helpful tips to remember when it comes to the IRS.
Ghost Tax Preparers
The term “ghost” tax preparer refers to a scam where an individual, who may or may not be qualified to do so, prepares a victim’s taxes for a fee, but neglects to sign the tax return. Not signing the return makes the “ghost” preparer effectively invisible and untraceable. As they often make up income or other ways to increase your refund for their own benefit, not signing the return leaves the taxpayer liable for any lies perpetuated in the process. Furthermore, some “ghost” preparers will re-direct refunds owed the taxpayer to their own accounts. In this case, the taxpayer not only has to worry about the lost refund funds, but also proving the fraud to the IRS.
IRS Impersonators
Often, this scam begins with robocall combing. Robocalls allow scammers to weed out potential victims from those unlikely to respond to their scam. From there, many scammers will contact their victims as the IRS via phone or email. Scammers use the IRS’s name, and even go so far as to mimic their logo, employee names, and badges to make victims believe they are official employees. Sometimes IRS impersonators will say you owe money and demand immediate payment; other times they will say you are due a refund and ask for bank information.
1099 Scams
A 1099, specifically a 1099-K, reports tax information to you and the IRS about transactions from an app, online platform, or payment card processor. This covers a broad range of activities such as personal transactions, hobby income, or business income. Many people have reported receiving a 1099-K that stated they had made income from selling on eBay. However, these people had never sold or listed anything on the site. Even if you did not sell or list items on eBay, someone using your information may have. It is important to exhaust every avenue to find out why exactly you received a tax document. While it may end up being an accident, it can also be a sign of fraud.
Remember
The IRS will only initiate contact for specific reasons and must follow clear guidelines during these communications. The three reasons the IRS will initiate contact are because a taxpayer is overdue, the need to secure a delinquent return or employment tax payment, or as part of an audit or criminal investigation. However, the IRS will contact the taxpayer almost exclusively by mail. The IRS NEVER uses email to initiate contact. They will also never threaten arrest or legal action if you refuse to pay immediately.
Stay safe this tax season!
Sources:
Avoid scams: Know the facts on how the IRS contacts taxpayers | Internal Revenue Service
Ghost Tax Preparers | FTB.ca.gov
Don’t Fall for Scam Calls and Emails Impersonating IRS | Internal Revenue Service
Unexpected eBay 1099-K form could be fraud – Fraud