Popular Income Tax Scams

Beware of Income Tax Scams

Tax time is the time of year when people get anxious to receive their refund from the IRS.  It’s also the time of the year when financial criminals get to work on their income tax scams.  It’s easy to see why; income tax scams can often be completed in minutes, the pay often comes in cash, and while many thieves are caught, a lot of them manage to get away.  Sometimes the victims are taxpayers, and other times, the criminals attempt to defraud the federal government.  In most cases, all taxpayers end up footing the bill, so it’s worthwhile for everyone to do what they can to help prevent income tax scams.

income tax scamWe’ve written about the most popular scam making the rounds, where an individual pretending to be an IRS agent calls a taxpayer and demands immediate payment of thousands of dollars to prevent the taxpayer from being arrested.  While this is the most common income tax scam at the moment, it’s far from the only one.  Below, we’ll cover a few of the other income tax scams that are out there so that you’ll be warned ahead of time about how to best avoid them.

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Income Tax Fraud and Scams on the Rise

TurboTax Fraud Increasing

Tax fraud seems to be on the rise around the country as more and more states are seeing fraudulent tax returns being filed.  So far, some nineteen states have reported seeing fraudulent returns filed, and Intuit has responded to a rash of fraudulent filings by temporarily stopping the processing of state income tax filings through their TurboTax software.

Tax fraud is nothing new, and criminals know that filing a fake return is an easy way to pick up some quick cash.  By stealing the identity or personal information of a working taxpayer, the criminal can file a tax return with information that would warrant a refund before the legitimate taxpayer can file it themselves.  By having the refund sent to an alternate address, they can collect the cash before the victim has even had a chance to file their return.  This has been going on for years, but the problem seems to be on the increase.

turbotax reports fraudulent returnsUnfortunately, there’s little the victims can do to prevent this, as the perpetrators already have their Social Security numbers or other personal information required to file a return on their behalf.  Criminals seem to prefer to do this with state returns, which generally have somewhat more lax security built into the process than the Federal returns.  As Federal returns tend to be larger, the IRS has greater incentive to keep their systems more secure.

Intuit gave no indication as to when they’ll allow taxpayers to resume filing state returns, though they are still permitting people to use TurboTax to file their Federal returns.  TurboTax is one of the more popular do-it-yourself tax preparation software products on the market, and nearly thirty million Americans used it last year to prepare their Federal and/or state income tax returns.

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