Tax scams seem to be everywhere especially before the end of the fiscal year. These scams are very popular in the US. However, this is not the only place where criminals profit from taxpayers. These frauds can happen anywhere. The condition is to live in a country where people pay their taxes individually. As opposed to countries where employers are responsible for this.
Therefore, if you fit in the first group, avoiding tax scams is important. Fraudsters, impersonators, and hackers use different strategies to con taxpayers. Staying informed keeps you safe. So, here are a few insights on tax scams. Learn how to spot and avoid them in time.
When Do These Scams Usually Occur?
Tax scams can occur throughout the year. However, they are more frequent toward the end of the financial year (EOFY). Why? Because in this period people file their taxes.
Scammers are constantly on the lookout. And when they find a victim, they immediately act. Therefore, it’s important to be cautious. You could get a fake tax email or IRS impersonation call at any time. Yet, be more careful before the EOFY.
The Main Types of Tax Scams
There are two things criminals achieve through these scams:
1) Phishing for sensitive information
2) Collecting money from victims
The strategies they use to achieve these goals differ. Those who seek personal data might impersonate the IRS. They can call, text, or email you to ask for clarifications. They will ask you to provide different personal details. Some examples include your name, address, or social security number. The main reasons why criminals steal private information are:
- Impersonation purposes
- Financial fraud
- Selling it on the dark web
Scammers who look for illicit gains are even more dangerous. These people will do anything to get a money transfer. In many cases, they rely on intimidation. They often impersonate IRS agents. Then, they start harassing taxpayers over the phone. The claim is that these people owe the IRS money. And the request is that they immediately pay.
In other cases, criminals use their soft skills. Instead of inciting fear, they build trust. This is an efficient way of getting someone’s money. They pretend they work for a financial consulting firm. There are myriad such companies. So, being contacted by one doesn’t seem strange.
What scammers then promise is help. This can take different forms:
- Help with your tax forms
- Advice on how to pay taxes
- Help in reducing tax debts
Impostors typically charge a high fee for their service. Moreover, unlike real companies, theirs is an upfront fee. Those who fall for the scam, pay. Consequently, they never get help in return, nor a refund.
How to Efficiently Spot Tax Scams?
Do Your Research
To avoid scammers, always think rationally. Don’t rush to say yes to any offer. You might be promised tax reductions or help in tax filing. No matter what the offer is, judge it logically.
If it also comes with a hefty fee, think twice. Do your research first. If most companies charge similar fees, it’s a good sign. However, if a company has exorbitant fees, it’s a red flag. Moreover, research is always crucial.
Whether an alleged IRS agent or consultant contacts you, look them up. See if and what you can find online about that person. Also, don’t shy from asking their credentials or registration numbers.
If a threatening IRS agent approaches you, stay calm. Think rationally. These people have no reason to threaten you. But scammers do because they want to make money. Don’t give in to your emotions. Ask for the person’s identification information. Then, check them. Furthermore, contact the institution itself. They will clarify things.
Watch Out for the Red Flags
Also, remember that institutions typically communicate via mail. They don’t text, call, or email people. Let alone threaten them to pay their taxes. You will not get a fine for not answering a message. And if you owe money, there are legal means to tackle the debt. You don’t have to immediately wire money.
Another major red flag is an unconventional payment method. Because bank transfers leave traces, scammers use alternatives. Thus, they often ask for electronic wallets or cryptocurrency payments.
What to Do If You Are a Victim?
If you receive an IRS call or email, follow up through official channels. Contact the tax institution on the number/email you find on their website. It’s the easiest way to uncover a scam.
If you realize a scammer contacted you, report them. There are different websites for these crimes. It only takes a few minutes to make a complaint. This can help others avoid the same scammer. Additionally, it can help the authorities catch the author.
As for phony financial consultants, simply ignore their requests. If they become pushy, report them to the authorities. The purpose is the same – keeping others safe.
If you lose money in tax scams, resolution methods are unfortunately limited. This happens because scammers usually send money to offshore accounts. So, caution is better than feeling sorry.
This article is provided by Stratford Management.