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tax scams 2021

Popular Tax Scams (And How to Protect Yourself From Them)

Tax season is upon us, which means so are a popular form of theft: tax scams.

There’s no hard number on tax-specific scams, but in general, so-called imposter scams are a lucrative business for criminals. In 2019 alone, reported instances of this kind of scam siphoned $667 million from Americans. That’s not accounting for any instances that weren’t reported, which many aren’t.

But tax scams are a juicy target for a number of reasons. For one, almost everyone has to pay taxes, so theoretically, everyone is a potential victim. Tax scams can yield both vital personal identification data and money. And the nature of taxes – they can be complicated, and they’re sent to an organization (the IRS) that many people fear irking – makes people particularly susceptible to tactics meant to scare and confuse.

To help taxpayers out in 2021, here’s a list of some of the most popular tax scams, as well as how to protect yourself against them.

5 Popular Tax Scams

IRS Phone Impersonation

Some officious-sounding person from an unknown phone number calls you up. They give you a name, a badge number and a list of threats of punitive measures should you not pay them owed taxes.

Chances are the name, the badge number and your supposed transgressions are all fake.

This tactic frightens people into confused, rushed decisions, so it’s important to take a breath when you receive a phone call like this and remember a few important points:

  • The IRS always will mail you a bill first.
  • They will not ask for credit or debit card numbers over the phone.
  • They will not threaten you with police involvement.

Yes, the IRS as an institution is intimidating, and no one wants an IRS audit. But they’re not going to (nor do they need to) bully people into sending them money. The law is on their side, after all.

Phishing

People are increasingly reporting tax scams where they’re being threatened via email, text and other forms of digital communication.

Good news there: While criminals might be going digital, the IRS mostly is not.

The IRS is flat-out not going to make first contact about tax bills, tax refunds and other related monetary transactions via email. So if you get an email from seemingly out of nowhere, you can assume it’s a scam. If you want to make sure, contact the IRS through the various means listed on its official website.

Settlement Scams

Some firms brag that they can help you settle your debt with the IRS for “pennies on the dollar.” They can achieve this via a very real method called an “Offer in Compromise.”

That said, very few people actually qualify for OICs. Only 18,000 of 54,000 OICs submitted to the agency in FY2019 were actually accepted, says the IRS. So-called “OIC Mills” will charge you considerably high fees to help you apply, but you can actually check to see whether you’re qualified for free at the Offer in Compromise Pre-Qualifier Tool.

Fake Refunds

Some criminals go the extra mile by filing a return for you.

Sort of.

This tax scam requires someone to get your Social Security Number or Individual Taxpayer Identification Number. The scammer files a fraudulent tax return in your name, then the refund is deposited into your account. The fraudster waits until the amount has been deposited, then calls you in the guise of an IRS worker. They’ll demand you repay them in a specific method, usually gift cards.

This is a difficult scam to see through as it involves actual money hitting your account. But there are a few small giveaways. For one, the IRS will never demand a certain type of payment, especially not gift cards. Moreover, taxpayers are allowed to argue about the amount of money they owe the IRS. Should you ever be contacted about this kind of situation, hang up and independently contact the IRS, as well as your bank.

Aggressive Return Preparers

Some tax preparers claim that they can ensure giant refunds to all of their clients, and indeed they might be too good to be true. In some cases, these preparers will claim tax credits you likely don’t qualify for. In other cases, so-called ghost preparers, who might not even be qualified to prepare your taxes, will accept your money and churn out shoddy returns.

A couple things to watch for there:

For one, anyone who prepares (or helps prepare) federal tax returns must sign the return and include their Preparer Tax Identification Number (PTIN). Also, fraudulent preparers might ask you to sign a blank return or “promise a big refund before looking at (your) records,” says the IRS. If that’s the case, reconsider your preparer.

If you’re wondering how to identify a legitimate prepare, this IRS page on tax return preparer credentials and qualifications can help.

McManamon & Co. offers expert tax services to small and midsized businesses, from basic filings to payroll taxes to compliance services and more, and we’re happy to provide you with all of our credentials so you know we’re the real deal. And while we can help many businesses improve their tax savings, we do so based on getting a full understanding of our clients’ businesses and developing strategies to qualify for said taxes throughout the year – not just saving you money, but keeping you on the right side of the IRS.

Looking for tax help in 2021? We can help. Call McManamon at 440.892.9088 or contact us online today.

| Posted in small business, small business taxes, taxes