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Some Very Common Tax Scams and How to Avoid Them

In this article today, We will taking a good look at some very Common Tax Scams you'll see right now, and How you Should Avoid them easily.
tax scams

 We are now in a world were everyone looks for a means to make money. Some people go for legit ways of gettings money, and some others decide that any means in which they can get money, they will go for it.

This has brought about many people to join the stealing and or scamming domain of life. They are many different types of scams you will see outside. Someone might just dupe you and get your money when they see you, and or someone can program techniques to fool you and then steal your cash.

Well, today we will be more on the Tax scam domain. The tax season comes with its fair share of challenges, and unfortunately, tax scams are one of them.

These fraudulent activities, usually aimed at swindling innocent taxpayers out of their hard-earned money, continue to evolve and become increasingly sophisticated and or popular.

It is crucial to familiarize ourselves with the various tax scams lurking out there and learn how to avoid falling victim to these unscrupulous schemes. That is one of the simple reasons why we brought about this article today.

Table of Contents

Tax Scams and How to Steer Clear of Them

What are Tax Scams

When a person or organization knowingly and deliberately provides false information on a tax return in order to reduce their tax obligation, it is considered tax fraud. In essence, tax fraud is the act of falsifying information on a tax return in an effort to evade paying the full amount owed.

That is, if a person or organization is looking forward to paying a huge tax and do not want to pay directly from his pocket, they will create a scheme or schema to fool another person or organization, so that the latter can pay for him or her and reduce his own payment amount.

Well, knowing this can be very annoying being on the scammed side. But you should not bother again. Below are some very popular Tax Scams you will see right now. And will also include some of the ways to avoid them from reaching your finances.

Tax Scams and Their Solutions

1. Phishing Scams:

One of the most common tax scams involves phishing schemes. Cybercriminals send emails or create fake websites that appear to be from legitimate tax authorities, such as the Internal Revenue Service (IRS).

These deceptive messages ask for personal information or passwords, claiming that it is necessary to process the taxpayer's refund or resolve a tax issue. And once you enter that website and add your informations there, they will be able to access every of your funds.

How to Avoid: To avoid falling prey to these scams, just have to put in mind that the IRS(Internal Revenue Service) will never contact you through email, text messages, or social media platforms. Be cautious and do not provide any personal information without verifying the source thoroughly.

2. Identity Theft and Fraudulent Returns:

Tax identity theft occurs when someone uses your Social Security number or other personal information to file a fraudulent tax return in your name. By doing so, they aim to obtain your refund or other financial benefits.

How to Avoid: To steer clear of tax identity theft, take the necessary steps to secure your personal information. Protect your Social Security number(SSN), shred sensitive documents, and refrain from sharing personal details on insecured websites or over the phone.

3. Fake Charities:

During tax season, scammers often take advantage of the generosity of individuals by creating fake charities to solicit donations. These scams can be particularly damaging because not only do they defraud taxpayers, but they also exploit the vulnerability of those in need.

And they usually sound very real in their stories to convince those send out a helping hand to those in need. Well, this has also made many people to be very vigilant to beggars to avoid being scammed.

How to Avoid: To avoid falling into this trap, research the legitimacy of charitable organizations before making any donations. Visit reputable websites like the IRS's Tax Exempt Organization Search to ensure you are contributing to legitimate causes.

Also, when you see a website that claims to be for charity donations, you should make sure you check their legitimacy before making another step ahead. You can just type on search, "Is *name of website* legit?". This will remove a lot of previews. And if you don't see previews of the site, advice is not to make any donations there.

4. Preparer Fraud:

Some individuals choose to hire tax professionals to assist them with their returns. However, it is crucial to select reputable tax preparers who have a proven track record of providing reliable services.

Unfortunately, tax preparer fraud is another scam that taxpayers should be aware of as Scammers are usually very smart, but use it for the wrong purposes. Fraudulent preparers may promise large refunds, charge an exorbitant fee, or falsify information on your return.

How to Avoid: To avoid this, do thorough research before selecting a preparer and ensure they have the necessary qualifications, such as a Preparer Tax Identification Number. You can also check online from popular and recognized websites which will tell you which preparer to go for.

Other Things to Keep in Mind

1. Does the IRS send emails about Refunds?

No, the IRS does not send emails about tax refunds. In fact, they specifically warn taxpayers to be aware of scams that use email or text messages to impersonate the IRS. And advice that you visit their official website to get any informations you need.

If you receive an email about your tax refund, it's best to be cautious and assume it's a scam.

How to check your refund status:

  • The best way to check on your tax refund is to visit the IRS website [IRS website] and use the "Where's My Refund?" tool.
  • You can also call the IRS at 1-800-829-1040 (though wait times can be long). So, we won't advice you go for this one, but go to their main website.

2. Penalty for Filing a False Tax Return

Filing a false tax return is a serious offense with steep penalties.  There are two main categories of penalties: criminal and civil.

Criminal Penalties

  • A fine of up to $100,000 ($500,000 for corporations)
  • Imprisonment for up to three years
  • Both a fine and imprisonment

Civil Penalties: The IRS can also impose civil penalties for filing a false tax return.  These penalties are typically a percentage of the taxes owed.

3. Knowingly Filing a Fake Tax Return

Knowingly filing a false tax return is a serious crime called tax fraud. It's important to understand the consequences because they can be severe. Here's a breakdown:

Potential Penalties:

  • Fines: Up to $100,000 for individuals and $500,000 for corporations.
  • Imprisonment: Up to three years in federal prison.
  • Both: The court can impose both a fine and imprisonment.

Final Thoughts on Tax Scams

Tax scams have the potential to cause severe financial and emotional distress. By familiarizing ourselves with the various scams and taking precautionary measures, we can protect ourselves from falling prey to these fraudulent activities.

Remember, the key to avoiding tax scams is to be vigilant, stay informed, and only share personal information with reputable sources.

By doing so, we can enjoy a worry-free tax season and protect our hard-earned money. Stay safe, and remember, when in doubt, always consult with official tax authorities like the IRS.

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About the Author

Content Writer| Finance Specialist| Video Editor| Blogger and Vlogger is what I am and we share content mostly on finance tips and tech tutorials.

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