As the Tax Filing Deadline Approaches, Here’s How to Spot and Avoid Common Tax Scams

Most taxpayers now have less than two weeks to submit their tax return for 2023 as the April 15 deadline approaches. The deadline’s pressure has allowed scammers to take advantage of taxpayers. The IRS’ criminal investigation agents identified over $5.5 billion in tax fraud the previous year. Last week, the Justice Department urged taxpayers to choose their return preparers wisely as Ghost Tax Preparers have increasingly become common. Apart from that, several other scams are also stealing from unsuspecting tax filers. Here are some common tax scams and ways to spot and avoid them.

Ghost preparer scams

Ghost preparers pose as legitimate tax preparers who file refund claims on behalf of their clients. They often take upfront money to prepare your tax returns but they never sign it and make it look like the taxpayer has filed for the return themselves. They may also add unsubstantiated deductions or credits to inflate the refund and then steal it by directing the money to their bank accounts. Furthermore, these ghost preparers disappear when something goes wrong leaving the taxpayer liable for the repercussions.

How to spot a ghost tax preparer scam?

Tax preparers who demand an upfront fee and charge additionally based on the size of the refund could be ghost preparers.

Preparers who refuse to sign the tax return may be fraudulent as legitimate tax preparers are required to sign returns and include their IRS preparer tax ID number.

Preparers who ask taxpayers to sign a blank return and those who ask for cash payments only without providing a receipt could also be fraudulent.

Furthermore, if a preparer promises hefty returns, invents false income to get more tax credits, and claims fake deductions to boost the size of the refund, it is a major red flag.

Fake identity theft scams

In tax-related identity theft cams, criminals reach out to the victims posing as IRS agents. They claim the victim’s identity had been stolen and was used to open fraudulent bank accounts. They then instruct the taxpayers to pay up via gift cards or crypto to secure their assets and protect their identity. Once the payment is done, the fake agents disappear with the money.

How to spot a fake identity theft scam?

Taxpayers should beware of any unsolicited communication, phone calls, or emails claiming to be from the IRS.

Furthermore, if people who claim to be government officials use pressure tactics to extract payments, taxpayers should cross-check their identity and verify the information from the official portals.

Most importantly, the IRS will never ask for any payments, especially in the form of gift cards or cryptocurrency.

'Unclaimed refund' scam

In this scam, criminals are sending mail to unsuspecting taxpayers informing them about an unclaimed tax refund. The letter seems to be coming from the IRS and it is mostly titled “about your unclaimed refund.” The official-looking letter then instructs taxpayers to just email a picture of their driver's license and confirm their Social Security number with a (fake) IRS agent.

How to spot an unclaimed refund scam?

The letters titled “about your unclaimed refund” are a red flag for taxpayers. The IRS does not reach out to people via mail to inform them of any refund-related information. Taxpayers receiving such letters should crosscheck and verify the contact information provided on the letter with the official portals. The letter may contain incorrect agency phone numbers and addresses, weird punctuation, strange fonts, and outdated or wrong tax information. Furthermore, a sudden tax windfall which seems too good to be true, is something to watch out for.