Tax season is upon us and it appears that it is also open season on innocent taxpayers. Tax scams and rip-offs are common on the Internet, in print and on the airwaves.
A recent study by a government agency found a disturbingly high percentage of commercial tax preparers made errors amounting up to $2,000 per taxpayer in improper refunds.
Beware “Instant Refund” Loans
You may think that because you’ve seen “their” commercial on TV and because they are a national chain that you are dealing with a reliable firm, but think again. Quick-refund loans by commercial tax preparation firms are one of the biggest scams going- and completely legal. The “tax prep” firm offers a short-term loan, often called an “advance” of the amount of the taxpayer’s anticipated return. The interest on this loan, however often exceeds the amount of the return and then some! Additionally, fees may be gouged, no, charged for this service to persons who are later told they do not qualify for the “advance”.
Taxpayers are often lured by the promise of large refunds that the taxpayer may not be entitled to. Moreover, some dishonest tax preparers will charge extremely high fees for their “expertise” when they are, in fact, skimming off the taxpayer’s return for themselves.
Avoid Rip-Offs
How to avoid this scandalous practice? Prepare or have your return prepared early by a reputable tax preparer (preferably one recommended by friends) and file either by mail or online- yourself. As soon as you receive your W-2 is the optimum time. The closer to April 15th one files, the longer the wait for your refund.
Taxpayers must remember that they are responsible for the accuracy of their filed returns, not the preparer, so it is very important to choose your tax preparer wisely. Also be aware that many commercial tax prep firms hire and train their staff seasonally. So the person on the other side of the desk may not be much better informed than you about taxation and finance. Is that who you want preparing your taxes?
Internet Tax & Identity Fraud Phishermen
As many are now aware, Phishing on the Internet is one of the best ways to fall victim to identity theft. Tax fraud Phishermen pose as major financial institutions, tax return preparers and even the IRS. Their fictitious emails are intended to trick the unsuspecting into disclosing personal information. A typical “IRS” email will notify a taxpayer of an outstanding refund which they may collect if they provide their Social Security number. The fraud is perpetrated to gain access into the financial accounts of consumers, apply for loans in their names and run up credit card charges to their spending limits.
Michael G. Kessler, President and CEO of Kessler International, the leading forensic accounting and auditing, computer forensics and corporate investigative strategies firm offers this advice: “It is very important to know that the IRS does not contact taxpayers via the Internet. If a taxpayer has concerns as to whether documentation allegedly from the IRS is authentic, they should call 1-800-829-1040 to confirm it.”
