What Is Phishing?
Scammers use email, websites, or other contacts appearing as reputable companies or relationships known to the target to compel them to release or reveal sensitive and personal information, such as credit card numbers and passwords. These scammers are becoming more and more adept at devising ways to make the fake emails or website appear reputable. Some scammers are even using phone calls to pretend that they are valid agencies or technical support personnel.
If you receive an email or phone call that asks for any personal information from you, don’t comply. Especially do not click on any links or call any numbers contained on the email or fake website. Contact the true party using numbers or email addresses you know are valid. Report any fake scammers to sp**@**e.gov and to the company being impersonated. Remember, legitimate business or agencies will never ask you to send or release sensitive information through unsecure channels.
The IRS Criminal Investigation works closely with the Department of Justice to find and shut down scams, and then prosecute the criminals involved.
Some Common Tax Scams
We have compiled a brief summary of this year’s list and made some recommendations. The complete list and more details are available at the IRS web site:
- Identity Theft: There are criminals out there who file fraudulent returns using someone else’s Social Security number. This problem has become so prevalent that the IRS partnered with states this year as part of the Security Summit Initiative to create a more secure system for filing for taxpayers.
- Phone Scams: If you receive a phone call from someone who says they are from the IRS who threatens you with police arrest, deportation, license revocation or other things, hang up. Contact a trusted friend or adviser and explain the call and they will help you determine if there is any real merit in it. The IRS will not call you out of the blue. Most likely, the caller was a scammer.
- Return Preparer Fraud: The IRS says that about 60 percent of people pay someone else to prepare their tax return. Most of these preparers are honest and trustworthy. However, there are some dishonest preparers who set up shop each filing season to perpetrate refund fraud, identity theft, and other scams on this list. Make sure you check out the qualifications of your tax preparer. For example, at GAM, all of our preparers are licensed as Certified Public Accountants. You do not necessarily need a CPA to do a simple tax return, but your preparer should be enrolled with the IRS to prepare returns, and possess the necessary training and experience to be competent.
- Inflated Refund Claims: Taxpayers need to be wary of anyone promising inflated or surprising tax refunds. Never sign a blank return. Do not use a preparer who promises you a big refund before even looking at your records or charges fees based on a percentage of the refund. The IRS says that scam artists use flyers, advertisements, phony store fronts and word of mouth via community groups and churches in seeking victims.
- Fake Charities: Be on guard against any groups masquerading as charitable organizations to attract donations from unsuspecting contributors. Make sure your contributions go to legitimate and currently eligible charities. The IRS.gov website has the tools taxpayers need to check out the status of charitable organizations.
- Hiding Income with Fake Documents: Filing false Form 1099’s or other fake documents is a scam that taxpayers should always be on the lookout for and definitely avoid. If a preparer suggests falsifying documents to reduce tax bills or inflate tax refunds, run away. You are legally responsible for what is on your returns regardless of who prepares the returns and what they instructed you to do.
- Abusive Tax Shelters: Taxpayers should avoid using complicated tax structures with the aim to avoid paying taxes. Watch out for people peddling tax shelters that sound too good to be true. Always get another opinion from a trustworthy tax professional.
- Falsifying Income to Claim Credits: Taxpayers should never make up income in order to erroneously claim tax credits as some scam artists try to suggest. Taxpayers are best served by filing completely accurate returns, as they are legally responsible for what is on their return.
- Falsely Padding Deductions on Returns: Taxpayers should never falsely inflate deductions or expenses on their returns to pay less than what they owe or potentially receive larger refunds. Don’t overstate deductions such as charitable contributions and business expenses or improperly claim credits such as the Earned Income Tax Credit or Child Tax Credit.
- Frivolous Tax Arguments: Promoters of frivolous schemes that encourage taxpayers to make unreasonable and outlandish claims to avoid paying the taxes they owe are on the rise. Taxpayers have the right to contest their tax liabilities in court, but no one has the right to disobey the law or disregard their responsibility to pay taxes. The current penalty for filing a frivolous tax return is $5,000.
- Offshore Tax Avoidance: A recent number of successful enforcement actions against offshore tax cheats and the financial organizations that enable them shows that it’s a bad idea to hide money and income offshore. The IRS offers the Offshore Voluntary Disclosure Program to help people to comply with their filing and tax obligations.
Taxes are not a popular topic for most people. But having a basic understanding and some knowledge of tax issues is important. Filing an accurate, timely tax return is vital to making sure you paid only the correct tax that is due. It is to your benefit to know all of the legal and proper deductions and credits that you are entitled to.
Choosing Punta Gorda Financial Planning as Your Tax Advisor
Making wise financial decisions now will result in a better life for your family in the future. We have the experience, training, and ability to listen to your needs, devise a successful plan, and coach you to your goals. Let us help manage your wealth effectively, so your future is clear and your financial dreams are attainable.
Be aware of the way criminals may try to do harm to you through scams that try to take advantage of your good nature. If you have any doubts about a tax related situation, please contact a knowledgeable and trusted friend or adviser.
Written by Thomas M. Geier, CPA, CFP®, PFS.
My aim is to offer clarity to your finances. I specialize in helping individuals and families determine what is most important in their financial lives, identify short and long-term goals, and make great choices for achieving comfort, security, and peace of mind.
I graduated from Loyola University in Baltimore, Maryland, and have been a Vice President of our investment management affiliate, Geier Asset Management, Inc, since its founding in 1999. I have over 25 years' experience in financial planning and investment management and am licensed as a Certified Financial Planner® professional, a CPA, and Personal Financial Specialist. I am member of the Personal Financial Planning section of the American Institute of CPS's and Florida Chapter of the Financial Planning Association.