Tax scams are on the rise this year. Here’s how to spot them | #scams | #elderlyscams
This tax-return filing season has the makings of a particularly hazardous one when it comes to thefts and scams.
White-collar fraud directed at consumers is on the rise anyway. Besides the usual dangers, there’s a lot of confusion about stimulus payments, debit and gift cards, and recent tax-law changes. Plus, millions of people might have unfamiliar tax issues this year, such as unemployment benefits they hadn’t received in the past.
If that’s not enough, millions of people are self-isolating at home, just waiting for criminals to call or text them.
Here are some of the usual tax-related warnings, with a few new wrinkles.
Hang up on gift card requests
You might not view gift cards as having much of a connection to income taxes, and normally they don’t. Yet scammers are contacting people, often by phone, conjuring a supposed tax or other type of debt and demanding that people pay it by sending in gift cards or phoning in a card’s identifying numbers.
The IRS and state tax authorities don’t contact taxpayers with unsolicited telephone calls or text messages, and government agencies don’t accept gift cards as payments.
“If anyone ever calls you claiming to be from the government and tells you that you owe a debt or must pay something, it’s a scam,” said Arizona Attorney General Mark Brnovich.
Scammers often pose as representatives of the Internal Revenue Service, Social Security Administration or perhaps other entities such as local utility companies, he said.
Brnovich issued that warning while standing in the gift card section at a Bashas’ supermarket in Scottsdale. Retail clerks in Arizona and other states are being trained to spot potential victims such as elderly shoppers buying gift cards, he added, and warning stickers are posted in the gift card sections of many stores.
Beware ‘ghost’ return preparers
The IRS is reminding people to avoid “ghost” tax-return preparers — those who refuse to sign returns and thus avoid accountability. By law, anyone who is paid to prepare or assists in preparing federal returns must have a valid PTIN or Preparer Tax Identification Number. Paid preparers must sign and include their PTIN on a return.
Preparers who don’t sign could be guilty of unethical or illegal practices. According to the IRS, these include overpromising refunds, charging fees based on the size of a refund, requiring payment in cash, not providing receipts, making up income to qualify clients for tax credits, exaggerating deductions or directing a client’s refund into the preparer’s bank account.
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“Choose wisely because you’re responsible for the information on your income tax return, no matter who prepared it,” said Ken Corbin, an IRS commissioner in charge of the agency’s wage and investments division.
The IRS has a section on choosing a tax-return preparer at irs.gov.
Watch for surprise jobless forms
When unemployment spiked last year amid economy-shutdown efforts to slow the coronavirus, it triggered jobless benefits for millions of people. But crooks took advantage of this, filing for payments in the names of victims and using their Social Security numbers and other personal information.
The IRS has warned people to be vigilant if they were mailed a Form 1099-G from state authorities but didn’t receive jobless benefits. Such payments might have gone to crooks. Because jobless payments are taxable, you could be on the hook if you don’t contact your state unemployment office and get the matter straightened out, with a corrected 1099-G form that hopefully will show zero benefits.
ID protection PINs available
If you’re really concerned about tax-related fraud, you may now apply for an optional identity-protection PIN or personal identification number from the IRS. It’s a six-digit code known only by a particular taxpayer and the IRS, and it’s available to people who can verify their identity. The program is designed to help prevent others from filing fraudulent returns in your name.
Each PIN is valid for a calendar year, meaning you would need to reapply each filing season. The IRS said its staff will never call, text or send an email requesting a PIN.
More information on the program can be viewed at irs.gov, under the “get an identity protection PIN” section. The IRS also offers PIN-obtaining options for people who can’t verify their identities online. One option is by completing Form 15227.
Know who you’re dealing with
In a busy year for fraud generally, “impostor scams” topped the list in 2020. They not only ranked as the most common fraud tracked by the Federal Trade Commission in a recent report but accounted for the most monetary damage sustained by consumers — $1.2 billion of $3.3 billion in total reported losses for 2020.
Last year’s $3.3 billion in losses represented a sharp rise over the $1.8 billion in 2019. The number of complaints jumped to nearly 2.2 million in 2020 from about 1.7 million in 2019.
As in the gift card example above, impostor scams involve crooks claiming to be someone else such as government or business representatives, family members or friends. The FTC received nearly 500,000 complaints about impostor fraud, with many linked to COVID-19 or stimulus payments.
Online shopping frauds were next most common, at 350,000 complaints. Many of these involve online sellers failing to deliver on promises — or failing to deliver at all.
Phone calls and text messages are the top way that crooks reach potential victims, the FTC said. If you spot a problem, you can notify the agency at reportfraud.ftc.gov.
Reach Wiles at email@example.com.