Tax Season Fraud: Red Flags and How to Protect Your Information

As tax season approaches, fraudulent tax professionals (“criminals”) are busy scheming ways to steal your money or personal information for their benefit. These criminals will call and email taxpayers, hoping to convince them to hire them to “prepare” their 2024 tax return. The criminals will promise large refunds, then steal your personal identifiable information (PII) when you share your confidential documents. Some of the criminals will file your tax return while taking fraudulent tax credits. Other criminals will never file your return, opting to steal your money and PII.

There are several things that taxpayers should avoid doing so they don’t fall victim to tax season fraud.

• Taxpayers should not use a tax preparer who made an unsolicited call to them.
• Taxpayers should not click on any link in emails from an unsolicited tax preparer. These links will most likely contain malware which will be downloaded onto your computer if you click on them. Once downloaded, the malware can steal your information, including your passwords.
• Taxpayers should not sign a blank tax form even if your tax preparer requests you do this. This is a huge red flag for fraud.  

All tax preparers should have a preparer tax identification number (PTIN) from the IRS. The PTIN is required for any paid tax professionals to prepare or help prepare federal tax returns. If your tax preparer does not have a PTIN, please find a tax preparer who has a PTIN. If the tax preparer charges you a contingency fee, the tax preparer will most likely fabricate documents to substantiate your higher refund or claim credits you are not eligible for. If a tax preparer guarantees a tax refund, this is a sure sign of fraud. If a tax preparer asks you to have the refund sent to them directly and then they will send you the refund minus their fees, run the other direction. This is fraud.

A criminal might call you and say they are with the Internal Revenue Service (IRS). This is a scam. No IRS Agent will call a taxpayer unsolicited. The IRS will always send you a letter via USPS mail before they reach out to you via phone. If you do receive a call from an IRS representative, please hang up and call the IRS directly. It is a hassle, but by calling the IRS directly, you are helping protect yourself and your PII. Additionally, an IRS Agent will never call requesting payment. These fraudulent requests for payments will be requested by wire transfers or crypto. Do not make payments in this manner. This is fraud.

There are so many tax season schemes out there that there is not enough time to talk about all of them. The following are a few you should also be aware of:

• Social media influencers talking about a lucrative tax strategy which will generate a large tax return for taxpayers. If it sounds too good to be true, it probably is. Please call HHM CPAs and talk to a licensed tax professional to ask about potential tax savings strategy before you file.
• Advanced payment schemes will target individuals who have a current tax liability from previous years. The criminal will state they can minimize your tax liability owed to the IRS, but you will need to send them an advanced fee before they work their “magic.” Once you send them the money, you will likely never hear from them again.
• Criminals will call and ask you to donate to a tax-exempt organization to save money on your taxes. Before you donate, check out the validity of the charitable organization by searching on the IRS website (www.irs.gov) by typing “tax exempt organization search” into the search bar.
• Criminals will tell you about tax secrets the IRS does not want you to know, but to obtain these secrets, you will be asked to pay a fee. Do not pay the fee. This is a scam. If you want to know about potential tax credits you are entitled to, please call a licensed tax professional.
• Criminals will call taxpayers in disaster zones to inform them of huge tax credits or ways to get a larger refund if they pay an upfront fee. Do not pay the fee.  If you’ve been affected by a natural disaster, call a licensed tax professional before you file.
• Criminals will use social engineering to contact payroll companies or businesses under the false pretense of conducting a background check on a former employee. The criminals will send an email containing a link to try and steal W-2 data and employee information. Once they obtain this information, they can file fraudulent tax returns before the actual taxpayer files. This creates problems for the taxpayer when they legitimately file their tax return. Conduct security and phishing trainings so your employees do not click on links from unsolicited emails from unknown individuals.

There are many other ways criminals try to steal money or taxpayer information. If you have a bad feeling about unsolicited tax schemes and strategies, call a licensed tax professional before you file your tax return. If your tax preparer does not have a PTIN, find another tax preparer. Never pay upfront fees or hire a tax professional who is charging a contingency fee on your refund amount. Making yourself aware of some of the common scams and using good judgement can help keep your money – and personal information – safe from criminals. 

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