There aren't many enjoyable aspects to tax season, but for a lot of folks, at least there's a tax refund check to look forward to. The problem is -- you're not the only one excited about getting a refund.
There are some con artists out there who have been looking forward to your refund check just as much as you have. According to The Wall Street Journal, tax fraud is the third-biggest way that federal funds are stolen, after Medicare/Medicaid fraud and unemployment insurance fraud. There were 1.1 million cases of it in 2011, up more than 2,000 percent over 2008's 51,700.
The Better Business Bureau has outlined some of the top tax scams. Here are their top three, followed by another big danger.
Social Security number theft: When your Social Security number falls into unscrupulous hands, it can be used to file a tax return for you, and to then collect your refund. When this scam is perpetrated, many victims don't even know about it until they receive an unexpected mailing from the IRS.
Phishing for personal information: "Phishing" is a year-round danger, used in non-tax schemes, too. It involves legitimate-seeming emails, calls, texts, or other contacts with you that prey on your trust or fear. You're told you need to give some information, such as your Social Security number or some other personal data, and when you do, it's often used to steal your identity. These phishing communications can be quite tempting, suggesting that the IRS has discovered that you're owed some money, for example. Don't fall for them.
One helpful thing to remember is that the IRS typically only contacts taxpayers through the mail or by telephone, not text. If they do call, ask for the employee's badge number and a contact phone number you can use to call them back. You can also contact the IRS to make sure that the employee and the reason for calling you is legitimate.
Shady tax preparers: There's nothing wrong with seeking help with your taxes -- it actually makes sense, given the complexity of the tax code that's now made up of almost four million words. Just be careful which tax pro you hire. While most are legitimate, there are some that are crooked. (Others are merely less than competent -- here are six warning signs.) As the Better Business Bureau explains, the crooked ones may be "skimming a portion of refunds, charging inflated fees for return prep services and/or promising refunds that are too good to be true." Remember that filing false numbers is against the law and that as the one who signs the return, you are the one responsible for being truthful on it.
Don't be the scammer: Whether or not you employ a tax pro to help with your return, resist the urge to inflate numbers, omit information, file false forms, or otherwise be less than honest on your return. Doing so makes you the scammer, and the IRS is on the lookout.
As a recent MSN Money article noted, "Between October and December of last year, the IRS launched criminal investigations of nearly 1,300 people. About 85 percent of those cases ended with somebody in prison, with sentences averaging four years." Your little tweaking may not be sufficient for a criminal investigation, but it could trigger an audit, fines, and penalties.
Take the first steps to building your portfolio.View Course »