10 Easy Ways To Spot A Tax Scam

There's no shortage of dirty tricks scammers will play on consumers when tax season rolls around.

And with taxes playing a key role in this year's presidential election, you can bet they'll be in the news more often than not.

"Typically ones show up every year where people take advantage of our fear of not filing properly or getting as much money as we can from the IRS," said Kay Bell, a tax expert who blogs at Don't Mess With Taxes.

With Bell and tax preparer Neil Johnson's help, Business Insider compiled 10 tip-offs to look out for this year:

1. Preparers Who "Work From Home."

Shady scammers tend to work from home where it's harder for them to be traced, said Johnson. 

"Anyone can go into Best Buy and buy (tax software), then prepare others' taxes from home, but when they print out the return, it looks as if the actual taxpayer filed it," said Johnson. "It's going to say the return was self-prepared and that makes it hard for the preparer to be held accountable by the law." 

If your preparer has shady whereabouts, drop him like a bad habit.

2. Cultural or Religious Deductions. 

"If someone's saying you don't have to pay your federal taxes because you're part of some religious or ethnic group, there's probably some scam that goes along with it," said Johnson.

Sample scams: African-American slavery reparations, or ones where the preparer puts a notation on the return, subtracting what you owe in wages from your actual income so you get all that money refunded.

Such scams typically take the IRS a couple years to catch, but they will catch it, said Johnson.

3. Cut-and-Paste Logos. 

"Whenever people see the IRS logo they get nervous," said Johnson, adding that scammers love to prey on Americans' irrational fear of the tax man. 

If the logo looks like a cut-and-paste job and was sent via email to boot, steer clear. 

4. Phone Calls and Emails. 

The tax man may have gone digital in recent years with direct deposits, online tax preparation software and his website, www.IRS.gov, but he still prefers to get in touch the old-fashioned way: snail mail. 

If you get a phone call, hang up. And watch out for emails that are likely phishing scams.

They'll claim the IRS owes you a bigger refund and that you need to send your info to a random, unnamed site. Don't click -- it's probably a link to download malware onto your computer, warned Bell.

"A lot of scammers go to a lot of trouble to build fake websites. The IRS has taken many offline, but email phishing scams still persist."

If you've received an unsolicited email that looks like a phishing scam, notify the IRS at phishing@irs.gov.

5. Inflated Charity Deductions. 

Everyone wants more deductions -- we covered 7 deductions that expired in 2011 -- but watch out. 

Any time a tax preparer asks you to inflate your charitable deductions, he's likely out to inflate his paycheck instead if he's asking for a "percentage," or cut, of your refund.

"This is an obvious one," said Johnson. "It's like inflating business expenses if you're self-employed or under-reporting your income to get a business deduction."

#-ad_banner_2-#6. Empty Storefronts. 

If the lack of steady business isn't a tip-off, then the questionable appearance and nonexistent signs should more than make up for it, said Bell. 

7. Twisting Old Tax Laws. 

Scammers love using old tax laws no one knows about to dupe their victims, said Bell.

"Sometimes they'll find an arcane form and say you need to fill it out," she said; other times they'll use the topic du jour to put your passing knowledge to the test.

This year, Bell expects scammers to have a field day asking victims to fill out paperwork for the Making Work Pay credit, which expired in 2010 and the payroll tax cut, which was automatically deducted from taxpayers' paychecks and is also no longer in effect.

8. Unannounced Visits. 

"The IRS will never show up to your home unannounced," said Bell. "You're going to know that they're coming well in advance."

As we've said, the tax man mainly communicates by snail mail, so if the crooks flash their "credentials," saying they've come to discuss an audit, politely tell them you're calling the police—from the other side of your locked door. 

"Don't talk to (the crooks)," said Bell. "Call the police and tell them you're being harassed by imposters."

9. Lousy Grammar.

Scammers aren't the brightest of the bunch, said Bell, so look out for broken English and poor grammar. 

"Usually there's some sort of bad grammar or something that feels off," said Johnson. "I've never seen an email that looked so good I would be confused."

10. Not Asking for Paperwork. 

"If anyone promises a refund without looking at all your info, they're probably running a scam," said Bell. "When they don't want a lot of documentation, that's a big red flag they're not on the up and up."

A legit tax preparer should ask for:

  • W2
  • Children's social security numbers
  • Investor income
  • Pay stubs and other employment information
  • Child custody info to claim dependents

If you suspect your tax preparer is engaging in some shady business practices, report it to the nearest IRS office. You can contact the IRS by phone at 1-800-829-0433. You can find more ways to protect yourself from tax preparer fraud here. 

Jill Krasny is the editor of Your Money at Business Insider. Read more from Your Money:

Is your tax preparer showing up at your home unannounced? It might be a scam. Protect yourself by watching for these 10 signs of tax preparer fraud...

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