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You could make an entire blog dedicated to how many tax scams are there. Today we will be talking about just a few of these and how to avoid them.
W-2 FORM FRAUD
There a few of these. Sometimes it takes the form of misleading or untrue information on how to get a larger refund, leading to filers reporting inflated incomes and withholding figures on their forms. This is tax fraud. Lying about your tax figures will result in, at best, severe fines, or maybe other criminal punishments like prison time.
Other times criminals try to to steal W-2 information from businesses and payroll companies to steal returns. Spear phishing is a type of cyberattack in which a highly personalized fake message is sent to trick a person or organization into giving up intimate information. Scammers may try to trick tax professionals by pretending to be new clients. The scammers may attack a malicious attachment or URL that, when clicked, will give the scammer access to the computer's systems and information stored.
There are a few signs to look for. Always be wary of suspicious behaviors or strange requests. Bad grammar or spelling errors could be a sign of a fake. Be sure that the person is who they say they are by checking their email and/or name. And do not click on any attachments or links if you cannot confirm they are safe.
UNCLAIMED TAX REFUND
Scammers are prone to steal sensitive information. They may send a letter claiming to be an IRS agent, and then proceed to ask for identifying information, like pictures of your driver's license, or your social security number. The point of this con is to steal the victim's return.
Warning signs for this kind of con may include a few things. Government organizations have certain standards on how they are suppose to write, so if yo see awkwardly written requests, or inconsistent font, and other grammatical mistakes. It is also useful to know that the IRS never contacts taxpayers through email, text, or social media about tax refunds. You should also be skeptical of similar messages that appear to come from friends or loved ones, since scammers may have stolen or compromised their email or text accounts.
SOCIAL MEDIA ADVICE AND SCAMS
It can be said that social media has not always been the best source of information. There are a lot of ways taking tax advice on social media can go wrong. One of the simplest way is misinformation. People will post with about things with complete confidence even if they are completely wrong. From falsifying a W-2 form to misunderstanding how more obscure tax documents, the internet is filled with people who think they know more than they actually do.
There is no magical way to massively increase your tax return. If something sounds too good to be true, it is. There are a lot of good places to look or information. For example, there is @irsnews on social media, you could go to www.irs.gov, the official IRS website, which is filled with official information on how taxes work, or you could go to a legitimate tax professional for answers.
DISHONEST TAX PREPARERS
Naturally, scammers may pretend to be legitimate tax preparers. People who need a tax preparer, by necessity, need to trust them with incredibly vital information that, if compromised, could lead to disastrous consequences for the victims. Naturally, scammers may try to impersonate a preparer in order to gain access to this information. Alternative, you may have a "ghost preparer", someone who does not sign the tax returns they prepare. They do this to avoid accountability for overpricing their clients for benefits they will not actually provide.
We recommend the following when selecting a tax preparer. Look for a preparer who is available year-round. Review the history of the individual or organization in the Better Business Bureau, to see if they have caused problems in the past or have the licenses necessary to do their job. Make sure the preparer offers IRS e-file, which greatly hastens the time in which you may receive your return. Look over the credentials of the preparer. Never sign an incomplete return. And finally, review the tax return before signing it and ask questions to make sure everything is accurate.
There are a lot of different kinds of scams to look for. They are found in every aspect of the financial and economic system. This can make it overwhelming to know what to look for. However, we have identify certain scams that come about when people wish to register their businesses with the government.
REGISTRATION FILING FEES
Each state requires a new business to register with the government. Requirements vary state to state, but typically there are filing fees involved. Some bad actors will try to trick you by saying that you need to pay these fees through a third party. As of writing this, there is no state that requires you to do this. So if you find yourself in a situation in which someone is telling you to pay to the government through them, be sure to understand what the rules actually are and do not be fooled by their tricks.
DBA RENEWAL FEES
It may come as a letter, or an email. It will probably say that it came from the state, and you must do something like paying a fee or making a call to a phone number (which will probably tell you to pay a fee). If you do not, then you will lose the rights to your business name and someone else will be able to claim it. The thing is that state regulatory agencies do not send letter like these. Another red flag to look for is to see if the money amount asked is greater than $100, some business registration companies let you start your business for free. So if you are looking to renew your DBA, the first thing you should know is that you can do it by yourself without a third party to help you in minutes. Look up in government pages by when do you need to renew your DBA and compare with your registration.
LEGAL FEES
There are many documents that need to be in order to be a business owner. Many licenses and permits require filing fees. So many scammers try to sell you fake licenses that you do not need or pretend to be a legitimate source for real legal documents. To avoid these, we suggest to look up for government agencies for what documents you actually need. If you look online, look for whether the site ends in .org, or .gov. Most government sites will either have the option to purchase the documents, or will direct to where you might get them.
FAKE INSPECTIONS
There are a few goals for faking being an inspector. They may aim to trick business owners into creating fake "verified" accounts for online retail services. They may just ask for your credit card information or commit fraud. Official agencies ask people to report any calls claiming to be government inspectors who ask for credit card numbers and/or personal information to their local authority. A sign of this kind of scam is the fact that a number of regulatory agencies do not call in advance for their inspections. If you have any concerns that you were called by a fake, call the relevant government agency to see if they are real or not.
DOMAIN NAME
There are a few scams involving domain names. They may claim that they is an interested buyer looking to buy their domain for a convincing amount of money, only as a means to get them to purchase a domain appraisal service and never provide the service. Do not pay for these services, the buyer should be the one purchasing the service and if you really want to know what your domain is worth there are free online tools for that. There is domain renewal scams, that try to alarm the victim into paying for a fake renewal service. And so on and so forth. In general, our advice is to be thorough in reviewing any emails asking you to pay for something, specially if they say its urgent. There are many tools like SpamAssassin, an open-source project who can help you verify whether something is a scam or not. Regardless, always verify to see if the person contacting you is really the person they claim to be.
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