Tax season is one of the most stressful times of year, and the prevalence of tax fraud can make it even more challenging. While scams and fraudsters abound, there are many ways that taxpayers can protect their income, identity and track record with the IRS. The IRS is not particularly concerned with minor, unintentional mistakes on tax returns, but it is very concerned with deliberate fraud.
Here’s how to make sure that your return falls into the right hands and protect yourself against unecessary audits.
Choose a trusted tax preparer
Thanks to the prevalence of digital tax filing services, it’s easier than ever to file a return. It is important, however, not to rush into selecting the CPA, accounting company or service that will assist you. To ensure that the individual, company or service you choose is legitimate, search their educational background, customer reviews and professional history online. A legitimate tax preparer will be transparent about their pricing, background and track record. Anyone who attempts to obscure details of their professional history or who pressures potential clients into purchasing their services should not be trusted. It’s also a good idea to avoid preparers who promise unrealistic refunds or whose proposed results differ drastically from other preparers.
Stay informed
Even if you’re not doing your taxes yourself, it’s vital to have a basic understanding of your tax rate, exemptions, and other basic tax information so that you can spot any obvious red flags before your return is submitted. To ensure that there are no obvious errors, you should always review your return before you allow a preparer to submit it. Legitimate preparers will allow you do so. If you’d like to stay up-to-date on tax requirements and regulations, the Interactive Tax Assistant is an IRS resource that helps taxpayers ensure that they’re on track to submit a lawful return. Everyone wants to pay the lowest possible taxes and receive the largest possible refund, but deliberately cutting corners can cause a lot of trouble for you down the line.
Protect your identity
Tax return scams are growing online and continue to target taxpayers through almost every contact method. One of the reasons taxpayers fall prey to these scams is that they are concerned about being audited.
In the event that there are inconsistencies or missing information on your return, do not give out personal tax or identity information through any medium until you have official notice of an audit.
The IRS never initiates audits via email, text or social media, and will not ask for bank pin codes or similar personal details. If an IRS representative gives you a call, that person should already have any necessary high-level personal information to initiate the audit. Remember that auditing is an official process with multiple steps, so anyone who demands that you wire money immediately is most likely fraudulent.
Every taxpayer being audited receives an initial notification letter from the IRS with the contact information of the auditor, even if the agency first contacted the taxpayer via phone. You can look into the validity of your letter here.
You always can verify whether you are truly being audited by calling the IRS at 1-800-829-1040. Real IRS employees will give you their full names and call-back numbers.
Although audits can be stressful, it’s important not to panic and make a damaging mistake. In a tax scam in February 2016, fraudsters claiming to be IRS auditors called senior residents of Long Island and demanded that the residents wire money via Walmart. The scheme ultimately cost these taxpayers over $30 million.
Don’t be afraid to speak up
If you see a colleague, friend or other individual committing tax fraud, know that you can report it securely. The IRS Whistleblower Program has helped recover significant amounts of taxpayer dollars, and entitles qualifying whistleblowers to receive up to 30% of any recovered funds.
The types of tax fraud to watch out for include:
- Failure to file a return
- Reporting false deductions or credits
- Falsifying income information
Tax fraud is always a significant issue at this time of year, but with the right information and a little bit of vigilance, you can protect your hard-earned money this tax season.
If you do witness tax fraud or suspect that you may be a victim of it, contact the IRS here or get in touch with an attorney right away.
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