Income tax filing deadline looms: be aware of tax scams and frauds

WASHINGTON – Valley residents who are scrambling to get their federal and state income tax returns completed and filed before the recently extended deadline of April 17, might consider a few tips to avoid ever-increasing tax scams and frauds.

Here are a few tips suggested by recent surveys and information gathered by WalletHub, a personal finance website that offers free consumer tools and provides users with free credit reports.

First, fraudulent returns result in identity theft. With a few key pieces of personal information – such as someone’s name, Social Security number or address – scammers can file a fraudulent tax return and ultimately pocket the victim’s refund, if any. It’s a serious problem, resulting in the IRS paying out roughly $11.1 billion from 2013 to 2015.

“Don’t ignore the warning signs: a letter from the IRS about multiple returns or a failed e-file attempt, in particular. That last one bears repeating: If you try to file online and are unable to do so, that could indicate a fraudster has already filed a return under your name,” Wallet Hub CEO Odysseas Papadimitriou said. “The idea of someone else doing your taxes might seem pretty appealing in normal circumstances. In fact, it’s something you’d typically have to pay for. That’s definitely not the case when it comes to fraudulent tax returns. Not only could this type of redundant filing mess with your refund, but it will also likely trigger an inconvenient investigation by the IRS.”

He said everyone should file as early as possible every year, even if they don’t expect to owe any taxes or receive a refund and take common sense steps to safeguard personal information, such as checking credit reports often. WalletHub and some banks offer free credit reports.

Next, watch out for phishing scams. Fraudsters often pretend to be IRS agents, accountants or other types of financial professionals. They do so hoping to coax sensitive financial information from consumers, which they can then sell or otherwise exploit for profit. And they often try this type of scheme on recent immigrants who are filing in the U.S. for the first time, commonly threatening deportation as a penalty for noncompliance.

“Phishing is perhaps the easiest type of tax fraud to avoid,” Papadimitriou said. “All you have to do is ignore emails and phone calls from people purporting to be trustworthy financial officials.”

After all, the IRS explicitly states that it “doesn't initiate contact with taxpayers by email, text messages or social media channels to request personal or financial information.” Furthermore, it “does not threaten taxpayers with lawsuits, imprisonment or other enforcement action,” such as deportation.

IRS suggests when clicking on emails or answering phone calls, ask to be put on any over the phone phishers’ do-not-call list. It works sometimes.

Lastly, ignore expensive illegitimate relief and servicing companies. Countless companies claim the ability to find hidden deductions, negotiate with the IRS or perform other services that sound even vaguely legitimate. Unfortunately, many of them are merely seizing an opportunity to charge high fees for empty promises. And they’ll use creative contract language to limit the need for tangible results, shield themselves from liability and thwart consumers from doing anything about it.

“We’ve all seen the budget TV spots and heard the radio ads that spew promises of tax salvation followed by a jet stream of fine print,” Papadimitriou said. “Some of them may even offer modest results due to sheer familiarity with the tax-collection process. Many others, however, simply gouge your bank account without really doing anything to improve your financial situation. The easiest way to ensure that doesn’t happen is to avoid such companies entirely.”

Before signing anything, just make sure to do some homework. Research the company’s reputation, peruse reviews and carefully read anything that requires a signature, especially a supposedly binding contract.

WalletHubs’ website, http://www.wallethub.com, offers a number of other taxpayer’s tips for those filing income taxes and urge consumers to familiarize themselves with the filing and refund processes used by the federal government. It’s free.