5 ways to prevent tax fraud.
Tax season is quickly coming up — April 18 for most taxpayers (with an extension until October 15 if you need it). This means it’s also high season for scammers who may try to grab your personal information online to use not just at tax time, but at any time. Which means you need to be extra cautious in the steps you take to prevent tax fraud.
Here are 5 ways to help you prevent tax fraud — and what you can then do with your tax refund.
1. Choose your tax preparer wisely.
Whether you do it yourself through an online preparer such as TurboTax, H&R Block, or other do-it-yourself preparers, or rely on a tax franchise preparer or independent accountant, you want to find a preparer who is available year-round – not just someone who sets up shop during tax season. Your tax situation may change at any time, and a reputable tax preparer should be in the business full time.
2. Ask your tax preparer for their IRS Preparer Tax Identification Number (PTIN).
All paid preparers are required to have one. This helps prevent using a “ghost” preparer – someone who won’t sign the tax return that they prepare for you. According to the IRS, a ghost preparer is a huge red flag.
The ghost preparer will either print the paper return for you and tells you to sign and mail it to the IRS. Or, if they electronically file your return, they will prepare it but won’t digitally sign it as the paid preparer. As a result, your tax return appears to be self-prepared, leaving you liable for anything that is on your return.
3. Don’t believe in promises of large refunds.
If you owe the money, you legally must pay the taxes. However, dishonest preparers often promise a big refund — even charging you fees based on a percentage of the refund. Also look out for preparers who:
- Require cash-only payments and not provide a receipt.
- Falsify income to qualify for tax credits or invent deductions to get a larger refund.
- Direct refunds into their own financial account rather than your account. For a direct deposit refund, make sure both the routing and bank account number on your tax return are correct.
- Understand that the IRS will not call you threatening legal action. Scammers make aggressive calls posing as IRS agents.
The IRS will always mail you a bill and not demand your bank, credit card information, a wire transfer or a gift card to resolve a tax issue. Instead, if you receive a call, immediately hang up. You can then call the IRS at 800-366-4484 to report the issue.
4. Be aware of phishing scams.
As with anything financially related, phishing scams in the form of emails and texts are rampant. One of the most recent scams taxpayers receive are emails that appear to be from the Taxpayer Advocacy Panel (TAP) about a tax refund. These emails are a phishing scam, trying to trick victims into providing personal and financial information. Do not respond or click any link. If you receive this scam, forward it to firstname.lastname@example.org and note that it seems to be a scam phishing for your information. TAP is a volunteer board that advises the IRS on systemic issues affecting taxpayers. The organization never requests, nor does not have access to, any of your personal and financial information.
5. Don’t fall for charitable giving scams.
There is a lot going on in the world lately – and if we have the means, we all would like to help. Like phishing scams, phone calls, emails or texts from so-called “charitable” organizations can take a significant amount from your savings. If you wish to give and claim the donation on your taxes, check third-party organizations such as give.org or charitynavigator.org to see how your donation will be allocated.
Now that you understand what to watch out for, what do you do with your tax refund?
Add to your emergency fund.
An unexpected home repair, a new car deposit or a job loss can quickly drain your emergency funds. If you get some extra money back from the IRS, consider upping your emergency funds in a .
Contribute to your IRA.
Whether it’s a Traditional IRA or Roth IRA, Popular Bank can help you .
Popular Bank is always looking out for your financial well-being. Contact your local branch today.