Four Tax Scams You Should Know Before You File

How many of you have received this type of e-mail at one point in your life . . .

DEAR SIR or MADAM,

MY AIM OF CONTACTING YOU IS TO SEEK YOUR ASSISTANCE IN TRANSFERRING THE SUM OF THIRTY FIVE MILLION UNITED STATES DOLLARS ONLY (US$35,000,000) OUT OF NIGERIA AND INTO YOUR TRUSTED BANK ACCOUNT ABROAD. THESE FUNDS WERE PART OF THE FUNDS, WHICH WAS FOUND IN HER LATE HUSBAND’S PRIVATE ROOM. IMMEDIATELY AFTER HIS SUDDEN DEATH LAST YEAR AND SHE QUICKLY INFORMED ME, SINCE I VIRTUALLY RUN MOST OF HER SECRET BUSINESS BOTH HERE IN NIGERIA AND OVERSEAS, AS SHE HAS A LOT OF CONFIDENCE IN ME AND FORTUNATELY WITH MY IMMEDIATE ASSISTANCE, AND CONTACT WE WERE ABLE TO DEPOSIT THE MONEY IN A SECURITY VAULT PENDING WHEN THE WHOLE SITUATION WILL BE CALM.

These scams were known at the Nigerian Scam letters, and most consumers know that if they received these types of e-mails they should immediately delete them and not respond.   However, today there are a whole host of new scams out there that you need to be on the lookout for as technology evolves especially when it comes to your income taxes.  While you are always watching out for red flag audits, here are six tax scam you need to put on your list

  1. Phishing Scams

What is it? As the word Phishing implies in the title, it is an email or website disguised as a trustworthy entity that is designed to fool you into downloading malware or giving your information away.  These target everyone, but especially unsuspecting seniors in an attempt to gain social security numbers or bank information.

The red flag(s):

  • Email requests for money or private/sensitive information, or instructions to open an attachment, often from a fake email address or website as an example. Remember, you’ll see some of these where a friend or relative is in a foreign country and asks you to wire them money.

Protect yourself by… verifying the sender’s email address or website. Be vigilant, as a minor spelling “error” could mean the difference between a legitimate entity or a scammer.  Or, what you may look out for is to inspect the country of origin.  Does the e-mail say .de or .ru instead of a .com.

  1. Phone Scams

What is it? Phone calls from criminals impersonating the IRS attempting to get you up in arms that you may owe money to the IRS.

The red flag(s):

  • The “fake” agents demand immediate payment of taxes, often in an angry manner.

Protect yourself by… immediately hanging up on anyone that shows these red flags. The IRS will never demand payment over the phone, threaten you, or request payment without first mailing you a bill.

  1. Return Preparer Fraud

What is it? When a tax preparer falsely manipulates the figures on your income tax return to fraudulently obtain tax credits.

The red flag(s):

  • Tax preparer boasts that they can get you a larger refund than anyone else.
  • Fee is based on your refund. This is a sure sign that the preparer is up to no good.

Protect yourself by… choosing a reputable return preparer. Ask for their IRS Preparer Tax Identification Number (PTIN) and never sign a blank return.  If you can get an enrolled agent or a CPA this will help as well.

  1. Falsely Padding Deductions on Returns

What is it? Falsely inflating deductions or expenses on tax returns. A dishonest tax preparer might do this if they expect a percentage of their fee to come from your refund.   If you don’t know what deductions are legitimate or the refund seems too good to be true, this should give you cause for consternation that something was done incorrectly.

The red flag(s):

  • Dishonest or illegal reporting of deductions to inflate your refund in hope of a percentage of your refund as the fee.

Protect yourself by… making sure you file a 100% accurate return. If you think some of the claims being made by the preparer don’t seem correct, then you should consider tax software or another preparer.

About the author  ⁄ Ted Jenkin @ Your Smart Money Moves

Ted Jenkin @ Your Smart Money Moves

Hey!

My friends and family all think I’m a workaholic, but I say I’m just a guy that loves to help people do better in life.

My mother is still the only one that calls me by my real name Theodore Michael, my wife calls me Teddy, but for the rest of you it is just plain old Ted.

Ever since I was a little kid, I always loved money and being an entrepreneur. In fact, I still have cassette tapes of me talking to my grandmother at the age of five and my mother tells me all the time how much I played with money as a kid…

Read More About Ted Here

Ted Jenkin is a frequent guest columnist for the Wall Street Journal and Headline News Weekend Express. He is the co-CEO of oXYGen Financial. You can follow him on LinkedIn @ www.linkedin.com/in/theceoadvisor or on Twitter @tedjenkin.

Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment advisory services offered through Kestra Advisory Services, LLC (Kestra AS), an affiliate of Kestra IS. oXYGen Financial is not affiliated with Kestra IS or Kestra AS. Kestra IS and Kestra AS do not provide tax or legal advice.

The opinions expressed in this commentary are those of the author and may not necessarily reflect those held by Kestra Investment Services, LLC or Kestra Advisory Services, LLC. This is for general information only and is not intended to provide specific investment advice or recommendations for any individual. It is suggested that you consult your financial professional, attorney, or tax advisor regarding your individual situation. 

Background and qualification information is available at FINRA’s BrokerCheck website.

One Comment

  • May 31, 2017

    The scams shown here are true. Many people face such type of issues. This blog is really helpful in awaring the people for the fraud scams. Also, one should consult financial planners before making any kind of investment, as they are expert in tax savings, this can give you enough confidence to not to mind such type of scams.