By Clay Wyatt, Contributor
Imagine this: Someone claiming he's from the IRS calls and says you owe money. He demands you to pay via a pre-loaded debit card or wire transfer. Do you send the money?
If you answered yes, you walked right into a scam. Now, this person (who is not from the IRS, by the way) is soaking in the sun on a tropical island with your money.
Tax scam artists use various tactics every year to try to steal taxpayers' hard-earned money. Below are the top tax scams you'll want to avoid this tax season.
1. The Impersonator
This person won't take no for an answer. According to the IRS, the scam artist might even threaten you with arrest, deportation or suspension of a business or driver's license if you refuse to comply. He might even become hostile and start insulting you.
Another trick this person might try is to say that you're owed a tax refund. This is an attempt to pump private information out of you.
- Ask for credit or debit card numbers through a phone call
- Call to demand immediate payment
- Call about taxes owed without first mailing a bill
- Demand payment without giving you an opportunity to question or appeal it
- Require a specific payment method
- Threaten to have law enforcement groups arrest you for nonpayment
2. The Phisherman
3. The Identity Thief
- Dumpster diving
- Mail interception
- Purse snatching
- Shoulder surfing (listening to or watching you as you say or enter information)
4. The Bogus Charity
To avoid charity scams, the IRS suggests using the Exempt Organizations Select Check tool at IRS.gov to find qualified charities to donate to. Also, it recommends not giving out personal information to solicitors. And of course, don't send cash to anyone.
5. The Fraudulent Tax Preparer
Such individuals also target those with a filing requirement by promising inflated refunds due to bogus credits and Social Security benefits.
This scam artist will likely not give you a copy of your tax return. He might also deposit your money into his bank account and deduct a sizable fee before giving you the rest.
- Asks for proof of income, as well as eligibility for credits and deductions
- Enters his IRS Preparer Tax Identification Number
- Provides a copy of your return
- Signs your return as the preparer
Other Tax Scams
- Abusive Tax Shelters: Abusers use captive insurance companies, foreign financial accounts, Limited Liability Companies (LLCs), Limited Liability Partnerships (LLPs), offshore credit and debit cards, and other instruments to avoid paying taxes.
- Hiding Income to Hide Fake Documents: Scofflaws file false documents to hide taxable income.
- Falsifying Income to Claim Credits: Scam artists encourage taxpayers to falsely increase reported income, typically to maximize refundable credits.
- Frivolous Tax Arguments: Scam artists try to promote frivolous tax arguments, which have been thrown out of court. A taxpayer can face a $5,000 penalty for filing a frivolous tax return.
- Offshore Tax Avoidance: Criminals try to lure taxpayers into hiding their income and money in offshore accounts.
Photo credit: Eugene Zemlyanskiy