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It’s tax fraud season. If you have to file a return, you only have until April 15 to become the unwitting target of tax-preparer fraud or have your personal information and identity stolen (unless you get an extension, of course).
It sounds extreme, but think about it — when you file a tax return, especially electronically, you’re forking over a lot of personal information, including your Social Security number and bank information, which is required on the forms. That provides scammers with a lot of incentive, enough that the Internal Revenue Service and the Better Business Bureau are teaming up to issue tax fraud warnings.
The IRS warns consumers that fraudulent tax preparers might pad their tax returns. Scammers who do this often base their fees on a percentage of the expected refund — more money for you, legitimate or not, means more money for them. Other shysters might alter return information and pad refunds without the taxpayer’s knowledge after the forms have already been signed. The taxpayer receives their expected refund and the preparer deposits the excess to a different bank account.
Another fraudulent-preparer scam involves altering the bank account and routing numbers on an already-signed tax return to a different account. In this case, the filed return is accurate, but the taxpayer never sees a refund at all — it all goes to the scammer.
Finally, a scammer can file an unauthorized return. Say you visit a shady tax preparer but decide for whatever reason not to use them. Later, you attempt to file on your own, or file through a different preparer, only to have your return rejected because the scammer has gone ahead and filed your documents anyway, routing your refund to their own bank account.
In these cases, the unwitting taxpayer is responsible for the discrepancies. Luckily, most tax preparers are legitimate, and these scenarios can be avoided with common sense and homework.
“Do your research now,” says Erin Dufner of Austin’s Better Business Bureau, “because you could be more rushed as deadline approaches.” Ask friends and family to recommend reliable tax professionals. If you’re unsure of a preparer, you can check out companies’ business reviews at bbb.org.
The IRS is warning consumers to avoid preparers who:
• Advertise through homemade flyers and brochures implying credits or refunds are available without proof of eligibility.
• Offer free money with no documentation required.
• Promise refunds for “Low Income — No Documents Tax Returns.”
Those tactics should raise a red flag.
Here are other tips from the BBB to help you choose a reliable tax professional:
Hire a pro. Credentialed tax preparers such as enrolled agents, certified public accountants and tax attorneys have completed exams on tax matters and are obligated to stay current on tax law through continuing education. In addition, should you be audited, tax attorneys and CPAs can represent you in court.
Get an estimate. Your return will cost more or less to prepare depending on the intricacy of your situation and time required to prepare the forms. “Go through the information and give as much detail as you can and get a firm estimate on how much it’s going to cost to prepare your taxes in writing,” Dufner says.
Avoid claims that sound too good to be true. Tax law doesn’t vary from preparer to preparer. Be wary of any preparers who promise larger refunds than their competition. “And absolutely be wary of anybody who says that the estimate they give you will be based on the anticipated refund,” Dufner says.
The BBB recommends that consumers file their taxes electronically and have refunds deposited directly into their bank accounts. “That’s the fastest way to get your refund, and it also cuts down on fraud because you will be submitting your information directly to the IRS through a secure server,” Dufner says.
“Because so many people are choosing a tax preparer online, there are some things they need to look out for,” she adds.
Scammers might use the IRS’s name or logo in bogus communications, especially online. They might be trying to obtain personal and financial information to facilitate identity theft. The BBB says that the IRS never initiates taxpayer communications through email. If you receive unsolicited email claiming to be from the IRS, do not respond with any personal information and report it to the IRS at email@example.com.
The IRS also warns consumers to be wary of Internet solicitations that direct taxpayers to toll-free numbers and then solicit Social Security numbers. “Make sure you know exactly who you’re sending your personal information to,” Dufner says.
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