It’s Tax Season: Be on the Lookout for Tax Scammers

It’s Tax Season: Be on the Lookout for Tax Scammers

I just read about a taxpayer (in this case, we’re using the term loosely), whom we’ll call Victor. He has a good job, has raised three kids and put them all through college. He saves for retirement. His taxes are regularly withheld from his paycheck, so there are probably no big tax debts from which he is hiding. But he has not been current with the IRS for 30 years.

I do intend to file.” Yet it never quite happens

“I’ve often thought about why I do this,” he said. “I have theories, but none has helped me get past the fear of filing and doing it on time. I rationalize. I think I’m just a small guy and the IRS wouldn’t be interested in me.

Unlike Victor, most of us do file our annual taxes, but it’s generally with some trepidation

For the 37% of American workers who are employed as independent contractors, there is the uneasiness of wondering if they’ve claimed enough in their quarterly filings. No one wants a big surprise during tax season.

But there’s a bigger, more insidious surprise waiting for many unsuspecting taxpayers

The IRS calls them “ghosts”. They’re shady operators that the Internal Revenue Service (IRS) calls “ghosts”. Those who are certified to prepare tax returns for other people have a legally required 2019 Preparer Tax Identification Number (PTIN). Ghosts don’t have a PTIN and don’t sign the returns they work on, leaving their clients holding the bag for any filing falsehoods.

These ghosts are brazen, setting up shop in pop-up offices

  • Ghosts set up shop around tax time in pop-up offices in malls. They pitch their services at community-gathering places such as churches or clubhouses.
  • They lure customers with promises of big refunds, often predicating their fees on a percentage of the refund. Real tax preparers base their fees on their time, generally an agreed-upon rate per hour.
  • They might invent income to falsely claim tax credits or fabricate deductions for business, education or medical expenses.

By the time the IRS catches on, the ghost will have vanished—with your fee

It’s your name on the return, and you’re liable. It may take some time for the IRS to catch up with you and your missing taxes. In the meantime, you will be accruing penalties and interest.

Some ghost preparers take the scam a step further, stealing refunds outright by routing them into their own bank accounts. Other tax prep fraudsters work online, sending phishing emails that appear to be from tax pros, or creating impostor websites that claim to prepare and e-file your return.

The Federal Trade Commission (FTC) warns:

“These websites looks legitimate,” but “they’re set up to collect personal information that can be used to commit fraud,” including identity theft.

Here are some red flags. Be very suspicious if your tax preparer:

  • Asks for payment in cash.
  • Has an excuse why you won’t receive a receipt.
  • Bases fees on a percentage of the refund. Tax preparers base their fees on their time.
  • Wants the refund deposited in his or her bank account. Ridiculous.
  • Marks your return as “self-prepared” or affixes a business label rather than signing the form by name. A certified preparer will have a PTIN.

One more thing: IRS robocalls

Who hasn’t received an intimidating phone call that starts with “This is the IRS”. Hang up and report it—this is a robocall. Never return a phone call from someone claiming to be the IRS. The IRS never discusses personal tax issues through unsolicited emails, texts or over social media.

We look forward to assisting our clients with their uncontested legal matters

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