Tips to Avoid Tax Scams

6 Tips to Avoid Tax Scams

Tax season is hard enough all by itself, as each year we gather paperwork, file forms, write checks, and wait for refunds. Few of us look forward to the process. But in recent years, the IRS reports that thousands of people have suffered far more than the usual hassles of the season—losing millions of dollars and their personal information to tax scams and fake communications.

Don’t let yourself become the next victim. Follow these six tips to protect yourself from the high costs of tax-related scams.

1. File EarlyThink of tax season like a race between you, as you collect and file all your tax-related forms, and criminals, who are intent on getting there first to file fraudulent returns in your name. Simply put: The sooner you file, the less likely any fake returns will be filed in your name.

2. Protect Your Social Security NumberThe reason you need to file early is that criminals don’t need much information to e-file a tax form in your name, score a quick refund, and disappear before the crime is noticed. All they need is your name and Social Security number, plus a phony W-2 and a fabricated Schedule C showing business income.Note that filing a fake tax return in your name requires your Social Security number—which is why it is essential to protect that number all year long. Don’t give it away when you don’t have to, like at doctor offices where they may request it but don’t require it. And take other steps too, like shredding documents that have the number on them and avoid giving the number to strangers by phone or email.

3. Use Reputable Tax Professionals or SoftwareA lot of personal information is recorded on tax forms—information you don’t want to give away to criminals. Find a local, accredited tax preparer, preferably one recommended by friends. You can confirm that they’re legitimate by checking their information at the Better Business Bureau.If you use tax preparation software, make sure you research that as well. It is generally preferable to use one of the larger and better-established companies instead of discount online options.

4. Avoid Insecure NetworksDuring tax season, you’ll no doubt spend more time online accessing sensitive financial information through your bank, credit card companies, and other institutions. If you complete your tax return using your computer, you will also need to transmit a great deal of confidential information.The problem is that if you perform any of these online activities via free wireless connections at your local coffee shop, airport, or hotel, the information could be vulnerable to attack using readily available software. To keep your private information safe, avoid free hotspots and instead use secure, encrypted connections at your home—and preferably sign up for a virtual private network, or VPN. For tips on making sure your home wifi is up to snuff, read our post on securing your home network.

5. Beware Suspicious EmailsThere are all sorts of email scams to be aware of all year long, but tax season brings with it a higher than usual level of risk.At work, you may be subjected to impostor emails, where scammers impersonate high-level executives to fool workers into handing over personal information. For instance, you might receive an email that appears to be from your boss, requesting Social Security numbers for a particular set of employees. Maybe the request isn’t that unusual, especially during tax season, and the email says the boss needs the details right away. Should you respond? Would you respond? To avoid scams, it’s better to look at the email carefully and ideally call or email the boss (in a separate email) to confirm its legitimacy.At home, you may find an email from the IRS in your private inbox, which leads us to our next tip.

6. Think Twice When the IRS Contacts YouCriminals routinely use the IRS name or logo to try to gain access to consumers’ financial information, which they can then use to file false returns, score quick money, or steal your identity.If the IRS contacts you by mail, phone, fax, or email, be suspicious. As we’ve written about before, the IRS will never initiate communication with you via email, and they will never pressure you to issue a payment over the phone. If you receive a communication you’re not sure about, call the IRS, and be sure to report suspicious emails to phishing@irs.gov.

Summary

Tax season is stressful enough without having to worry about being scammed. By following these six tips, you can protect yourself from the majority of tax-related scams—plus, by filing early, you can get an early start on enjoying the start of spring.