Protect Your Money and Data from Tax ScammersSubmitted by Hall & Burns Wealth Management, LLC on March 30th, 2021
It’s that time of year – tax season – and completing taxes for 2020 is likely to be complex and confusing for many Americans. For example, did you know:
- Unemployment benefits are taxable.1
- Stimulus relief checks are not taxable by the federal government, although they may be taxed by some states.2
- Any unreceived stimulus payment amounts may be claimed through a Recovery Rebate Tax Credit.3
- A home office may not be claimable as a deduction if you are an employee.4
Calculating taxes isn’t the only challenge facing taxpayers. They also need to protect accounts and data from scammers.
Beware of scams during tax season
This year, many online criminals are targeting pandemic-related changes. For example, Security Magazine reported hackers are targeting personal data by impersonating:5
- Videoconferencing platforms
- Health organizations
- News sources with information about the virus and vaccines
- Employers sending fake job termination notices
To help Americans avoid cyber threats, every year the Internal Revenue Service (IRS) publishes the Dirty Dozen. A list of “…common scams that taxpayers may encounter anytime but many of these schemes peak during filing season as people prepare their returns or hire someone to help with their taxes.”6
The top items on the list this year include:
Phishing. Merriam Webster defines phishing as a scam in which an internet user is deceived into revealing personal or confidential information.7
The IRS Dirty Dozen reported, “IRS Criminal Investigation has seen a tremendous increase in phishing schemes [using] emails, letters, texts, and links. These phishing schemes are using keywords such as ‘coronavirus,’ ‘COVID-19,’ and ‘Stimulus’ in various ways.”8
If you receive an email from the IRS, remember this: The tax collection agency doesn’t contact taxpayers about refunds or tax bills via email, text, or social media. In fact, the agency cautions Americans to not click on links in an email claiming to be from the IRS.8
In addition, normally, banks and financial institutions won’t ask for confidential personal data (such as usernames, account numbers, passwords, Social Security numbers, or PINs) by text message, email, or social media. If you receive one of these types of communications that includes a link or request for personal data, be wary.
If a communication triggers your internal alarms, a sound policy is to not click on any link. Instead, look up the organization’s phone number, call, and ask whether the organization contacted you. Alternatively, you can look up the organization’s e-mail address and contact them that way. Do not use contact information provided in the suspicious communication.
Fake charities. Ruthless people exploit emergencies and causes by creating fake charities. Last October, the Federal Bureau of Investigation (FBI) reported criminals were leveraging the pandemic to solicit donations for people and places affected by the coronavirus.9
Typically, the fake charities steal money and personal information collected from donors. The IRS reported:8
- “Fraudulent schemes normally start with unsolicited contact by telephone, text, social media, email or in-person using a variety of tactics.
- “Bogus websites use names similar to legitimate charities to trick people to send money or provide personal financial information.
- “[Criminals] may even claim to be working for or on behalf of the IRS to help victims file casualty loss claims and get tax refunds.”
Before giving to a charity or accepting assistance, checkout the tax-exempt organization search tool provided by the IRS to make the sure the charity is legitimate.10
Phone scams. If you get a phone call from the IRS, take steps to confirm it really is from the IRS. Don’t trust caller ID, even if it indicates the call is from the IRS, because caller ID can be manipulated. Also, ask the caller to provide a name, badge number, and official title. Before continuing the call, contact your local IRS office and confirm the caller is an IRS employee. If the individual works for the IRS, ask to be transferred to the correct extension.8
Criminals who impersonate IRS employees may try to:8
- Scare you by threatening arrest, deportation, or license revocation if you don't pay a bogus tax bill immediately over the phone.
- Entice you by promising a tax refund or stimulus payment can be delivered immediately if you provide personal and financial data.
The Dirty Dozen confirms, “The IRS will never demand immediate payment, threaten, ask for financial information over the phone, or call about an unexpected refund or Economic Impact Payment.”8
Instead of engaging with a caller or returning a voice message, the IRS recommends:11
- Hanging up the phone immediately.
- Reporting the call to the Treasury Inspector General for Tax Administration (TIGTA).
- Sending the phone number to firstname.lastname@example.org with the subject line: IRS Phone Scam.
Being aware of potential threats may help you protect yourself against tax scams. If you’re ever uncertain about whether a communication is real, err on the side of caution. Contact the source and ask them to confirm whether they sent the notification. If it’s a fake, notify the company and the authorities.
1 https://www.irs.gov/pub/irs-pdf/p5444.pdf 2 https://www.irs.gov/newsroom/economic-impact-payment-information-center-... (QJ2) 3 https://www.irs.gov/newsroom/recovery-rebate-credit 4 https://www.irs.gov/newsroom/heres-what-taxpayers-need-to-know-about-the... 5 https://www.securitymagazine.com/articles/92666-how-hackers-are-using-co... 6 https://www.irs.gov/newsroom/dirty-dozen 7 https://www.merriam-webster.com/dictionary/phishing 8 https://www.irs.gov/newsroom/irs-unveils-dirty-dozen-list-of-tax-scams-f... 9 https://www.fbi.gov/news/pressrel/press-releases/fbi-warns-of-potential-... 10 https://www.irs.gov/charities-non-profits/tax-exempt-organization-search 11 https://www.irs.gov/newsroom/taxpayers-should-know-the-signs-of-a-phone-scam-especially-during-filing-season
Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.
Rebalancing a portfolio may cause investors to incur tax liabilities and/or transaction costs and does not assure a profit or protect against a loss.
Dividend payments are not guaranteed and may be reduced or eliminated at any time by the company.
All investing involves risk including the possible loss of principal. No strategy assures success or protects against loss.
Securities offered through LPL Financial, Member FINRA/SIPC.
This material was prepared by Carson Coaching. Carson Coaching is not affiliated with the named broker/dealer or firm.