If you live in the U.S., you’re probably familiar with the W-2 tax form. During tax season, companies give all their employees a W-2 that contains your income, your social security number, and other important information. If this form gets stolen, you can say goodbye to an entire year’s worth of hard work!
In early March of last year, Seagate was victim to an email phishing scam. The scammers sent out an email asking employees for their W-2 tax forms and tricked staff into believing their email was a “legitimate company request.” Seagate gave away W-2 tax forms on all their current and past employees.
March is just around the corner! This means that tax season is coming up and tax frauds are becoming more common. The IRS created a list of the top ten frauds of 2017, exposing the secrets and reminding people how to avoid getting scammed.
Phishing: Phishing often comes from suspicious emails or websites, requiring people to provide personal financial information. Look at how real this fake IRS email is! This type of email will take your social security number, bank account number, address, and other information used to steal money or bring a virus into your computer.
The IRS will never initiate contact with taxpayers through e-mail, text, or social media to ask for a refund or a bill.
Phone scams: If you receive a call from the IRS asking for any information, you should immediately hang up. Phone calls from criminals usually use police arrest, deportation and license revocation to threaten the elderly and new immigrants.The IRS does not usually contact taxpayers through the phone.
Identity theft: This occurs especially around tax season. The IRS continues to chase those that file fraudulent returns using someone else’s social security number. Do not just give away your social security number. Make sure your network is private to prevent hackers from stealing any personal information.
Return preparer fraud: According to the IRS, about 60% of the population hires a CPA to help them with their taxes. Make sure you choose a qualified CPA and make sure the tax return goes directly to your bank account and not a fake taxpayer.
Fake charities: Since charitable donations are tax deductible, they become a target too! You can use the Select Check tool to check the legitimacy of the organization. IRS lists the following points to remind the public:
- Don’t give away any personal information such as your social security number when making donations
- Don’t use cash donations! For safety reasons, you should use credit card or check when making donations. Remember to get a receipt!
- When making credit card contributions, protect the info on your card to prevent it from getting scammed.
Inflated refund claims: Be cautious of those who ask you to sign a blank return or promises a big refund before looking at their records or charges fees based on a percentage of the refund. Scammers typically use flyers and ads with high tax returns as bait to attract vulnerable victims. They often check your finances before receiving a tax refund and ask you to sign a blank return.
Excessive claims for business credits: Avoid making improper claims for tax credit. Improper claims often result in failure to participate in or qualified research activities and/or satisfy the requirements related to qualified research expenses.
False padding deductions on returns: Avoid falsely inflating deductions or expenses on returns to pay less than what they owe because they could potentially receive larger refunds.
Falsifying income to claim credits: Low income families are sometimes easily influenced by small claims. Taxpayers should file the most accurate return possible because they are legally responsible for what is on their return.
Offshore tax avoidance: The recent success in enforcing action against offshore tax and those that help them show that it’s bad to hide money and income offshore.
If you really want to save on taxes, there are many ways! One option is to open an Individual Retirement Account (IRA) which is funded by the U.S. government.Assuming your income is $50,000 at a tax rate of 10%, then you’d be paying $5,000 for taxes. But if you set up an IRA, you would deposit $5,000 and use $45,000 as the income to file taxes. At the same tax rate of 10%, you’d only need to pay $4,500 for taxes, saving you $500!
Tax fraud can be a very serious issue and everyone should be aware of this! As a reminder, please don’t forget that the IRS would never initiate contact through e-mail or phone. If you receive an email or phone call, you can contact email@example.com or 800-366-4484 to report it. For the documents you receive, you can go to the IRS website to verify the document number. It’s better to be safe than sorry!