Beware of scams at tax time
With the new year in full swing, most people are beginning to think about preparing for the upcoming tax day.
But scammers are also gearing up to take advantage of unsuspecting taxpayers.
There’s no need to be caught unaware, though:
Each year, the Internal
Revenue Service (IRS) publishes its “Dirty Dozen” list alerting taxpayers to the most common tax scams. And as the threat of tax fraud continues to rise, the IRS is doing even more to get the word out about scams.
“The IRS does a lot of promoting,” says Christopher Pikelis, Head of Anti-Money Laundering/Financial Crime Investigations, UBS. Pikelis is a former IRS special agent who spent 29 years fighting tax crimes. “They’re on Twitter and Instagram, now that TV news isn’t the primary source for information.”
As you’re making your tax planning to-do list, check it twice for these four common threats:
1. Identity theft: A stolen identity is the most intrusive and challenging type of fraud to reverse, a fact that keeps it high on the IRS’s “Dirty Dozen” list. Tax time is high time for criminals who use other people’s Social Security numbers to file fraudulent tax returns or commit other tax crimes.
How to protect yourself: Make best practices second nature — from shredding important documents, to creating multi-factor identifiers for your accounts and using strong passwords. “You really have to look at cyber security as a part of your way of life,” urges Ellen Segriff, Head of Wealth Management Americas Privacy, Cyber and Information Security, UBS. “Like crossing at the light and locking your front door before you leave, it has to be a part of what you do in your normal day-to-day life,” she says.
2. Phone scams: An increasingly popular tactic for scammers is the use of aggressive and threatening phone calls to scare unsuspecting taxpayers into giving away sensitive information. Con artists impersonate IRS agents and threaten jail time, license revocation and even deportation.
How to protect yourself: Get to know the IRS’s process and your rights by visiting its website. “The IRS never calls anyone directly, unless they’ve met you already or you’ve been talking to them for a long time. And they don’t e-mail you,” says Pikelis. The IRS will also never ask for credit or debit card numbers over the phone, or demand payment without giving you the opportunity to ask questions or appeal. Experts say that this scam is particularly harmful to older adults and other vulnerable people, who are more likely to engage in conversation out of loneliness. Keep a close watch on loved ones who may fall into these categories.
3. E-mail phishing: Scammers prey on taxpayers’ dependence on technology and information, a fact that makes e-mail inboxes a major gateway for tax crimes. Around tax time, scammers send fake e-mails purporting to be from the IRS or with links to websites that are designed to steal personal information. Once your personal information is collected, they will sell it on the dark web or use it in other ways that can harm your reputation and your finances.
How to protect yourself: Remain alert. Be wary of e-mails from unknown sources and avoid clicking on links to websites that you are not familiar with. The IRS will never communicate with you about a bill or refund via e-mail.
4. Return Preparation Fraud: Many people avoid the task of gathering receipts and information to file taxes on their own. Instead, according to the IRS1, about 60 perccent of taxpayers use tax professionals to prepare their returns. Con artists have caught on, and plenty of them set up business each filing season to engage in fraudulent activity.
How to protect yourself: Choose your tax preparer carefully, and thoroughly check their credentials before entrusting them with your sensitive personal information. The IRS requires any tax return preparers who receive payment for service to register, have an IRS Preparer Tax Identification Number (or PTIN) and include that number on customer tax returns. Leveraging the PTIN to do your due diligence can lead to greater protection and peace of mind.
While these four scams top the IRS’s list, there are other risks to look out for. Also on the IRS’s 2017 list are fake charities, inflated refund claims, excessive claims for business credits, falsely padding deductions on returns, falsifying income to claim credits, abusive tax shelters, frivolous tax arguments and offshore tax avoidance.
Criminals have adapted rapidly to an increasingly complex world. By being aware of potential ploys and remaining vigilant, you can defend against these common tax scams. “If it doesn’t seem right, then it might not be right,” says Pikelis.
Are you doing all you can to protect and grow your wealth? Together we can find an answer. Connect with your UBS Financial Adviser or find one.