Love it or hate it, tax time is fast approaching. As you gather your various business documents to turn in to your Fort Collins tax service, you feel the pressure – are you forgetting anything? It’s like going on a family vacation. Did you remember to turn the thermostat down? Is the garage door still open? Did we remember to turn off the coffee pot?

Maybe you’re doing it yourself rather than relying on accounting services to do the dirty work for you. It seems easy enough, right? No matter how you choose to get your taxes done this year, you need to be mindful of scammers trying to rip off your refund (if you’re lucky enough to get one)!

The IRS creates an annual Dirty Dozen list. These specific types of tax fraud generally are the most prevalent and recurring types of fraud and schemes that they see cropping up.

Some of these occur year-round, such as bogus IRS “agents” calling you and informing you that you’re about to have a lien or judgment placed against your assets unless you pay a specific tax bill right now, over the phone. However, many of these tax frauds are centered around actual tax filing. We give you a heads up on some of the most common below:

Identity Theft

According to the Government Accountability Office, Identity thieves stole $5.8 billion in false refunds in 2013.

It may seem odd that someone else would file a return in your name, but it is growing in popularity among scam artists due to the ease with which they can pull it off. A scammer simply gets ahold of your social security number and birth date and files a return using this information. They use an address that directs the return to them, and most of the time, they falsify information on the return to maximize the amount they’ll receive.

You don’t find out about it until you go to file when the IRS tells you that you’ve already filed your return.

The best thing you can do to protect yourself from identity theft is to safeguard your information.

One simple way to combat this is to file as soon as humanly possible. Try to have all your ducks in a row by then so you can file immediately. If that just isn’t possible, do it as soon as you can to reduce your chances of being scammed. Solid financial accounting on your end makes this process easier, so if you didn’t keep things in order this year, that’s certainly something to focus on for the next.

As well, do not give out any of your financial information to anyone over the phone. Keep all of your account numbers, tax papers, and other financial documents protected and private–especially tax returns and bank statements. There are times when there is a legitimate reason for someone to have access to these documents, such as when applying for financing or buying a home. If you have any doubts, contact your CPA.

The Fake IRS Agent Phone Call

We all dread being contacted by the IRS, so when the phone rings and the person on the other end say they represent the IRS and they are looking for money right now, we get a little worried. However, it’s good to know that the IRS will only contact you by phone after you have been contacted by snail mail.

Here’s how the scam works: the phone rings and the person on the other end claims to be from the IRS. They spit out identifying information, like the last four digits of your social security number, birth date, and address, along with an IRS “badge number.” Of course, you believe the person on the other end is who he or she says they are – how would they have all of this information otherwise?

The person goes on to detail the fact you owe the IRS money, and the easiest way to remedy this situation is to send a prepaid debit card that’s been loaded with the amount they claim you owe. Maybe they ask for a Western Union or other money transfer service. They threaten you with jail time if you don’t comply, and might even say you’ll lose your license if you don’t send the money you owe. Think about it – if the IRS preferred you sent money on a prepaid debit card or wire transfer, don’t you think they’d have you pay this way all the time? The IRS doesn’t require these debit cards. They prefer to deduct it directly from your bank account!

Another version of this scam is where the caller asks you for your social security number and bank routing and account information, claiming you have money due to be paid to you. Never provide this information over the phone unless you’ve called the IRS directly. Most of the time, the IRS will send you a letter detailing money owed or money due to you rather than call you on the phone.

The IRS will never call you. In matters of owed or back taxes, they will mail you documentation, outline the problem, and what they require, and give you opportunities to work out payment options or other arrangements. Your tax service can serve as a bridge between yourself and the IRS, and if you receive any form of communication demanding payment for taxes, or even threatening you, take it to your certified public accountant if there are any doubts concerning its authenticity.

The best policy for any of us to take is not to panic or respond when we receive a piece of mail, email, or phone call demanding tax payments. This is not how the IRS works.

If you receive a call of this nature, just hang up the phone and report it to the Treasury Inspector General for Tax Administration at (800) 366-4484 or the IRS at (800) 829-1040. If you have any other doubts or questions, you can call your CPA or the IRS themselves (although they will have a few hours wait most of the time).

Phishing

This simple scam is perpetrated against many individual filers. Through internet ads or even direct emails, a thief posing as an IRS agent (or Electronic Federal Tax Payment System (EFTPS)) asks for personal information with the promise of huge tax savings. Some scams even purport to be authentic IRS or state revenue agency correspondence.

These are generally not to be trusted. Just like with phone calls, the IRS will not send you emails, and they will not act or communicate in a threatening demanding fashion, insisting on payment or financial information on the spot. It is also important to remember that the IRS will never ask for sensitive information in an unsolicited email. Although the results of these scams often have nothing to do with your personal taxes, victims of identity theft can spend years and thousands of dollars to recoup their good name and their monetary losses

If you receive an electronic communication of this nature, you can forward it to phishing@irs.gov

Sham Charities: Wolves in Sheep’s Clothing

Tax season is the perfect time for many reputable non-profit organizations to engage in fundraising. Businesses and individuals can use their donations as tax deductions that can limit their tax liability. Tax season is also the perfect time for fake charitable organizations to perpetrate a fraud upon taxpayers. Not all charities qualify for a tax write-off, and some “charities” actually aren’t charities at all.

In order for you to claim these deductions, your fraudulent charity may also ask for personal information that can be used in identity theft. In either case, any charitable donation can be verified as deductible by making sure the organization is an approved non-profit entity, with an active 501(c)(3) identification. Proper identification is described in IRS publication 526.

As well, there are certain requirements and rules to follow when writing off charitable contributions and donating to legal charities.

Please, be philanthropic, but validate the legitimacy of any charity before making a donation!

Fake Tax Professionals

We are not talking about your cousin who engages in tax filing on the side or a grad student in economics who supplements her income by filing taxes for clients. About 60% of us procure the services of a CPA or other tax service, and the majority of the time these tax preparers are legitimate. However, some are nothing more than criminals using tax season to rip you off.

There are criminals who pose as legitimate certified public accountants or set up a fraudulent tax service which is nothing but an opportunity for them to get access to all of your financial data and documentation.

A red flag is a storefront or internet-based tax service which has no history of service and appears only for tax season. Most tax prep providers have been around for a while, and are established. If you want to be sure that you are taking your tax files to a legitimate certified public accountant or CPA, it’s best to stick with established accountants and tax service providers.

Sometimes a “Skimmer” Tax Preparer is Just as Bad as a Scammer

Tax preparation has become a big business in recent years. Tax codes are complex and ever-evolving, and some unscrupulous tax preparers can take advantage of an individual’s lack of information to skim from their client’s tax return.

This can be dangerous because you can lose money that you never knew you were owed.

Your CPA in Fort Collins should be able to show you exactly how your refunds or shortfalls have been derived and the full support from Steven J. Wick and Associates can show you how your deductions have worked for you, and how you can potentially save money

Signs to Watch Out for that Your Tax Preparer May Be Scamming You

Below are a few things to watch out for so you don’t get scammed by a fake or dishonest tax professional:

Unwarranted or Excessive Refunds: Fool’s Gold

If it’s too good to be true, it is. This goes back to working with a CPA you can trust and feel confident that you are working with a legitimate tax prep service.

Claiming Unwarranted Fuel Tax Credits

Most taxpayers don’t qualify for these credits, and the IRS will spot this immediately. A knowledgeable CPA will know if you should claim fuel credits and can ensure they are properly filed.

Tax shelter schemes

Again, be confident in your accountant or tax service, and ensure that any “tax shelters,” you are solicited to invest in are recognized by the IRS.

Inventing Income that was Never Earned to get Credits

Unethical tax prep services sometimes convince clients to try this. It won’t work, the IRS, again, knows its business.

They may offer to create a fake 1099 form. These tax forms are then submitted to the IRS. Bogus documentation is something the IRS is an expert at spotting, especially when it’s submitted by a tax service.

Stashing or Hiding Taxable Income or Money Offshore: No Such Thing as a Hidden Treasure

The IRS warns against filers heeding the advice of unscrupulous money managers that promise to “hide” money in improperly developed trusts or offshore accounts.

According to Kelly Phillips Erb, contributor for Forbes Magazine, creating a trust for the purposes of tax evasion, rather than simply for estate planning, will surely raise the ire of the IRS.

Many offshore banking institutions are actually not havens for hiding money from taxation. If your CPA is offering to ‘hide’ money offshore, you probably need to find a new CPA.

The IRS heavily scrutinizes “hidden” accounts. Taxpayers should be leery of setting up trusts or accounts in an attempt to protect taxable earnings.

Steven J. Wick & Associates, PC can show you ways in which your tax liability can be reduced in full compliance with IRS regulations. Legitimate trusts, such as irrevocable life insurance or marital deduction trusts, can be used to save individuals money on their taxes.

Using Frivolous Arguments to Justify not Paying Income Tax

No matter what, you, as a citizen, are legally obligated to pay federal and other taxes. No constitutional or other argument holds any legal weight when it comes to getting around this.

Avoid Tax Fraud and Tax Scams with a Local, Reputable Business CPA in Fort Collins

There are many ways that an experienced tax preparer can save individuals and businesses money on their tax returns.

These warnings are aimed at auditors and filers alike, and sometimes small businesses that are devoted to saving money during tax season can be prime targets. The IRS does not look any more favorably on being scammed when it comes to tax filing than we do when someone tries to use the inevitable name of the IRS to defraud us.

Small business owners and individuals should always avoid claims made in unsolicited emails, websites, or other correspondence. Whether you are interested in help filing your individual return or your annual business return, don’t fall prey to promises from tax preparers that might skirt the law and cost you money and valuable time. To avoid all of the common scams, the IRS asks filers to be diligent when deciding on who will prepare their taxes.

As professionals in accounting, a qualified CPA sees plenty of these frauds and can help you undo the damage should you be subject to tax fraud. A skilled, experienced CPA in Fort Collins can help you navigate new IRS regulations, and still, make sure that you maximize your deductions and credits.

They will also help you avoid inadvertently engaging in tax fraud yourself when it comes to preparing and filing your taxes. If you are looking for a Fort Collins tax service that can help you protect what you’ve built, let Steven J. Wick and Associates support your business this tax season.