The deadline for filing 2023 taxes falls on Tuesday, April 18. Is your paperwork in order?
Scammers are ramping up their efforts as we get closer to the big day. Here are some tax scams to watch out for.
Social media ‘hacks’
The IRS is warning about fraudulent posts making the rounds on social media. The posts encourage you to use tax software to falsify information on your W-2. The “hack” involves inflating your income and withholding figures and your employer to get a large refund.
The IRS lists two more variations of this scheme:
- Scammers advise you to use Form 7202, Credits for Sick Leave and Family Leave for Certain Self-Employed Individuals, to claim a credit based on the income you earned as an employee, not a self-employed individual. These credits were available for self-employed workers during the onset of the pandemic in 2020 and 2021; they’re not valid for 2022 tax returns.
- Another scam involves making up fake people employed in your household that use Form 1040, Household Employment Taxes. The next step is to file for a refund based on sick and family wages they never paid.
The IRS reminds people who try this that they face a wide range of penalties. This may include a frivolous return penalty of $5,000. Filers also risk criminal prosecution for filing a false tax return.
Your smartphone is a prime target for scammers during tax season. Have you received unsettling phone calls warning that you will be arrested if you don’t call back? The IRS and its collection agencies don’t call people to demand payment over the phone.
The IRS does not text taxpayers regarding issues such as unpaid bills or refunds. While special circumstances may prompt a call from the IRS, you will receive several notices in the mail before this happens.
Gift cards? Really?
Here’s how this one goes. A scammer poses as an IRS agent and reaches out via email or phone, saying you owe money. First, you should know that no government agency will call you over something like this.
It gets worse. The “IRS agent” informs you that you can pay with gift cards. They’ll tell you to go to various stores to buy the cards, then provide them with the gift card number and PIN.
Anytime you hear “gift card,” it should raise alarms. There are countless scams surrounding gift cards, but this one is out there. Anyone who calls you, IRS or otherwise, demanding payment via gift card is a scammer.
Getting someone to help you file taxes is a good idea if needed. But be careful about who you’re trusting with all that information. A scammer posing as a tax preparer will promise big tax refunds and write-offs. They’ll falsify your documents with inflated numbers to ensure significant returns.
Get this. The scammer will charge you for these services and take all the money once the refund arrives. It gets worse. That’s your name on those forms. Now you may find yourself in legal trouble.
Here’s what to watch out for:
- If your tax preparer refuses to sign the papers or enter a Preparer Taxpayer Identification Number, they’re a fraud. Look up a tax preparer’s credentials in the IRS directory here. Also, check the professional organizations many tax preparers belong to.
- Fake preparers may charge you based on a percentage of your refund.
- If you’re asked to sign a blank or incomplete tax form, it’s a scam.
The crook has a chance to make life even worse for you. Once they have all your personal information, they could steal your identity.
This form is no longer valid
Do you run a business where you accept payment from apps like PayPal, Cash App, Venmo or Zelle? Up to the end of 2021, if you earned more than $20,000 through these payments (which include sales, goods and services, contracts and more) and conducted more than 200 transactions, you would get a 1099-K and have to report it.
Starting Jan. 1, 2022, if you earned more than $600 per year through a third-party payment processor, you were supposed to receive a 1099-K this year and have to report those 2022 earnings. It doesn’t matter how many transactions you completed.
Here’s what changed. Just before the end of 2022, the IRS announced that it’s delaying the implementation of the $600 rule. This is the result of mass confusion for taxpayers. Had the rule passed, millions of people and businesses would have received the form for the first time and needed help.
The IRS calls 2023 a “transition period” for tax preparers, tax software developers, businesses and individual taxpayers to familiarize themselves with the new rule. It also noted that the existing 1099-K reporting threshold of $20,000 in payments from over 200 transactions would remain in effect.
If you get an unexpected Form 1099-K in the mail from a payment app you use, don’t fill it out before contacting the issuer of the form. It could have been submitted in error.
What if you don’t use a payment app but still receive a form from the company? It’s a scam and you should throw it away.
How to report scams
There are a few ways to report a scam:
- Report unsolicited emails claiming to be from the IRS by sending them as attachments to [email protected].
- If you receive a phone call from the IRS and the caller is demanding payment or threatening to bring in the police, hang up and report it to the Treasury Inspector General Administration (TIGTA).
- Report the call via email to [email protected]. Write “IRS Phone Scam” in the subject line.
- Report scam calls to the Federal Trade Commission at FTC.gov. Add “IRS Telephone Scam” in the notes.
- Report unsolicited text messages from the IRS to [email protected]. Include a screenshot of the message, the date and time you received it, and the sender’s phone number.
- Go to the Report Phishing and Online Scams page at IRS.gov for more information.
Follow these tips to reduce your risk of falling victim to these types of scams:
- Don’t click links or open attachments in unsolicited or suspicious emails claiming to be from the IRS or other government agencies.
- Don’t call back or take any other action if you receive a voicemail or text message from a sender claiming to be from the IRS and demanding payment.
- Watch out for red flags such as spelling and grammar errors.
- Use two-factor authentication for accounts that offer it and password managers for better security.
- Always have a trusted antivirus program updated and running on all your devices. We recommend our sponsor, TotalAV. Right now, get an annual plan with TotalAV for only $19 at ProtectWithKim.com. That’s over 85% off the regular price!
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