Scam Alert — Watch Out for These Three Tax Scams

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With tax-filing season in full force, scammers are working overtime to steal the identity and money of many tax filers. This makes it critical to be especially diligent in guarding against fraud at this time of year.

Here are three tax scams in particular that you should be on the lookout for right now:

  1. Tax refund fraud — This scam has become more prevalent over the past few years. Here, crooks steal the identity and Social Security numbers of victims in order to file fraudulent tax returns in their name. They usually file electronically, claiming a low income and high deductions in order to boost the refund amount.

When victims go to file their legitimate tax returns, they’re told their returns have been rejected because a return has already been filed in their name. Meanwhile, the thief has already collected a fraudulent tax refund.

Crooks have recently put a new spin on this scam by stealing victims’ bank account information along with their Social Security numbers and having refunds direct deposited into their bank accounts. Then the thieves call victims and tell them the refunds were made in error and the money must be returned to the IRS immediately. They instruct victims to send the fraudulent refund to a supposed IRS account that’s really a bank account they control.

One of the best ways to guard against this scam is to obtain an Identity Protection PIN from the IRS. This is a six-digit number that must be used when your tax return is filed in order to verify your identity. Once you obtain an IP PIN, you’ll get a new number each tax filing season. Visit IRS.gov/getanIPPIN to learn more.

  1. Ghost tax return preparer fraud — This type of fraud can be especially deceptive because it’s perpetrated by paid, yet unethical, tax preparers. Dubbed “ghost” tax preparers, these thieves don’t sign off on returns they prepare using a valid Preparer Tax Identification Number, or PTIN, as they’re required to by law. 

The ghost preparer then promises the client a large tax refund and charges a percentage of the refund as a fee. The preparer may falsify income on the return to get clients refunds they don’t qualify for or claim fake deductions to boost the refund amount. The preparer might even direct tax refunds into his or her account instead of the taxpayer’s account.

The best way to guard against this type of fraud is to review your tax return carefully if you use a paid preparer to make sure it includes the preparer’s PTIN and your bank account and routing number. For help in choosing a reputable tax preparer, visit the IRS’ Choosing a Tax Professional guide.

  1. IRS phone scam fraud — This scam has been around for a while, but many taxpayers are still tricked by it every tax season. Scammers call victims on the phone and tell them they have an unpaid outstanding tax bill that’s due and must be paid immediately. Then they instruct victims to make payment by wire transfer or a prepaid debit card. Or, scammers tell victims they’re entitled to a large refund if they provide personal information, including their bank account and routing number.

Many thieves are able to use sophisticated phone spoofing technology to make it appear that calls are coming from the IRS. And if they have obtained the victim’s Social Security number, this makes them look even more legitimate.

It’s important to remember that the IRS never asks taxpayers for money like this over the telephone. All such IRS correspondence is done through postal mail. If you ever receive such a call, simply hang up and don’t share any information with the scammer.

Visit the IRS Tax Fraud Alerts page if you have more questions or want to learn more about tax scams, as well as learn how to report scams if you’ve been victimized. 


The commentary is limited to the dissemination of general information pertaining to Frontier Wealth Management, LLC's ("Frontier") investment advisory services. This information should not be used or construed as an offer to sell, a solicitation of an offer to buy or a recommendation for any security, market sector or investment strategy. There is no guarantee that the information supplied is accurate or complete. Frontier is not responsible for any errors or omissions, and provides no warranties with regards to the results obtained from the use of the information. Nothing in this document is intended to provide any legal, accounting or tax advice and Frontier does not provide such advice. This information is subject to change without notice and should not be construed as a recommendation or investment advice. You should consult an attorney, accountant or tax professional regarding your specific legal or tax situation.

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