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Accounting Thought Leader Uncategorized

Two Tax Scams to Look Out for as the April 15 Tax Deadline Approaches

Alan Vaughn

By Alan Vaughn, COO of Habif, Arogeti & Wynne, LLP

Every year the IRS releases its “Dirty Dozen” tax scams that individuals need to watch out for during the tax-filing season. With just one week to go before the April 15 deadline, we at Habif, Arogeti & Wynne, LLP (HA&W) have narrowed this list to two scams that have dominated the tax return process this year. In the hurry, and sometimes chaos, that typically leads up to the deadline date, these are the scams that you need to watch for.

Scam #1: Mind your identification

You file your taxes on April 15 and wait for your refund. When your refund check doesn’t show up in the mail by June, you contact the IRS only to find out that your refund was claimed and mailed out nearly four months ago…but not to you. As you put the pieces together, you realize that a scammer has stolen not only your social security number, but your identity and e-filed a fraudulent tax return on your behalf, pocketing your refund.

Scammers steal your social security number and early in the tax season, like January or February, e-file a false tax return. It only takes about 21 days for the IRS to mail a refund check to e-filers, so the fraudster gets the refund check and cashes it before you realize that your identity has been stolen. Also, when an individual e-files, they don’t have to have a W2 or any other tax documents. All a person needs is a personal identification, like a social security number.

This scam tops the IRS 2014 Dirty Dozen list. Unraveling this scam, clearing your name and securing your refund is time-consuming and laborious. In the last few months, we have had several clients who have been affected by it. The good news is that we were able to work with the IRS on behalf of our clients to clear up the problem and get their refunds issued.

Scam #2: $1 million worth of telephone calls

Your telephone rings, you look at the caller ID and see it’s the IRS calling. Who wouldn’t pick up the receiver? On the other end of the telephone is a seemingly knowledgeable person explaining that you owe taxes and need to pay them ASAP. If you’re a recent immigrant, you’re told that you could be deported if you don’t pay your taxes right away.

That scenario is the gist of one of the most prevalent tax scams occurring this year. Pushing the scam over into the “could be legitimate” category is fraudsters’ use of technology. On the first call, the caller ID read Internal Revenue Service (IRS).  If an individual was suspicious and hung up the phone, the fraudsters called back. With the second call, the caller ID read the local police department name.

According to Reuters, more than 20,000 complaints about this scam have been registered with the Treasury Inspector General for Tax Administration (TIGTA). Even more troubling is that over $1 million was defrauded from individuals who didn’t realize it was a scam.

Fraudsters typically are successful because they make people feel scared and create crimes that seem, well, plausible. When it comes to tax fraud, all people are at risk. Here’s what you can do to protect yourself.

  1. Know that the IRS does not call and ask that people immediately pay their taxes over the phone. If you get a call from someone identifying themselves from the IRS, that should be your first warning signal. Ask a lot of questions, like:
    1. May I have your employee number?
    2. What is the name of your manager?
    3. May I have your telephone number so that my attorney can call you back?
    4. Be aware. If you e-file and the returns won’t go through, that is a sign that your identity could have been stolen. Call your CPA or the IRS right away.
    5. Check your credit regularly to ensure that your identity hasn’t been stolen. If you think that your identity has been stolen, call the IRS so that it can shore up your tax account.

As I am writing this, the fraudsters are developing new ways to separate you from your money. Just remember that you have to cooperate to give it to them. If you receive a call or letter from the IRS, the best way to ensure it is real is to contact or forward it to an accountant to review.

Have you been hit by a tax scam? Send me an email and tell me about it: [email protected]

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