All You Need To Know About Tax Filing Scams And How To Be Safe

The tax filing season has begun, and citizens are gearing up to submit their income tax returns. While many are planning to do it on their own, several others may be relying on tax preparers for assistance. However, the Better Business Bureau has warned citizens of the many scams like Ghost Tax Preparer Scams and Imposter/Phising Scams, executed by criminals during the filing season. With roughly three months remaining until the filing deadline of April 15 for general tax returns, businesses and consumers are advised to be cautious at every step of their tax filing process.

What Are Ghost Tax Preparers?

According to the BBB, the "black market" tax preparers get to business during the tax filing season setting up shop usually in a rental or short-term location. These people promise fast or large refunds to filers and are uncertified individuals who bypass checks and balances in the tax preparer certification system. They prepare the tax returns for their clients, but when submitting them to the IRS, they ask the taxpayer to sign their return. Thus, it looks like the return has been self-filed.

This creates a huge problem for the taxpayer as in case something goes wrong in the return, the black market tax preparer is nowhere to be found, ‘ghosting’ the taxpayer. Since the return is technically self-filed, the taxpayer is held liable for errors or omissions, including underpayment and negligence penalties, which the ghost tax preparer filed. This happens because the large refund promised to the client was bogus in the first place.

The Internal Revenue Service (IRS) requires all tax preparers to have a PTIN or a Preparer Tax Identification Number. This works only if the tax preparers sign the returns they file, unlike the ghost tax preparers who make their client sign the returns.

How to be safe from Ghost Tax Preparers?

Taxpayers should be wary of preparers who promise fast or large returns, this is the first red flag. It is recommended to not sign a return that is prepared by someone else who is claiming to be a preparer. Funds should be deposited to the personal account of the taxpayer only. Some ghost taxpayers ask their clients to have the funds deposited into their accounts.

Taxpayers should ask for details on processes, credentials, and the PTIN of any tax preparer that they are looking to hire.

What are IRS Impostor and Phishing Scams?

The impostor scam is one of the most common scams during the tax filing season. In this scam, criminals pose as IRS officials, tax filers, or tax preparers to reach out to people and attempt to steal sensitive information, as per BBB's release.

The criminals make unsolicited phone calls and emails, which often display the IRS logo. On phone calls, imposters may ask taxpayers to make payments for verification of returns through debit cards or internet banking. After this, they would simply disappear.

The text communication instructs recipients to follow a link and verify their tax refund payment by entering their Personally Identifiable Information (PII) including their and encourage recipients to follow a link to verify their tax refund payment by entering PII, such as their Social Security Number, date of birth and current address, on a lookalike website of the IRS. In the phishing scam, taxpayers lose their sensitive data which can lead to identity theft or Stolen Identity Refund Fraud.

How to be safe from IRS Imposters and Phishing Scam?

Taxpayers should avoid unexpected phone calls about a tax refund. They should never share sensitive information or tax refund information over email, without vetting the person/email address.

The IRS or its officials will never ask for immediate payments from taxpayers via emails, text messages, phone calls, or social media.

Steps for the Victims of Tax Scams

Taxpayers impacted by tax preparer misconduct or tax imposter scams can file a report with the IRS at IRS.gov and register an official complaint on the business’s BBB Business Profile, as well. They should also submit a report to BBB Scam Tracker to alert fellow taxpayers. Victims of identity theft scams can contact the IRS at 1-800-908-4490 or file a complaint with the Federal Trade Commission (FTC) at ftc.gov/complaint as well.