The Biggest Tax Scams of 2019—and How to Avoid Them

You’re smart, right?

Of course you are. In fact, most of us like to think we’re intelligent, discerning, and can tell when someone’s trying to pull one over on us.

And for the most part, that’s true! You get extra points for reading this right now, because that means you know that fraud and financial peril are around just about every corner in 2019. It’s best to be prepared.

The trouble is that in the digital age, scammers are getting better and better at taking even the least gullible person’s information—then disappearing without a trace.

How significant is the problem? Well, this year the IRS identified 12 scams you absolutely need to avoid getting caught up in: the “Dirty Dozen.”

Top 12 Tax Scams of 2019

We’ve got twelve scams to cover, so we’ll need to be brief. Be prepared for the basics: the scams and how you can steer clear of them.

1. Phishing

The Scam: You may be more familiar with phishing than you realize, because it’s a scammer’s best friend. Phishing includes fake emails or websites that are designed to trick you into offering up your private info.

How to Avoid It: The IRS doesn’t initiate contact via email, so ignore any email claiming to be from the IRS. Even if the message claims you owe money, just flag it as junk or report it to the IRS.

2. Phone Scams

The Scam: A call from the IRS can be scary, but it won’t be legitimate. The IRS knows these calls are on the rise, and can threaten taxpayers with harsh punishments like arrest and deportation.

How to Avoid It: The IRS won’t call you, so if someone is claiming to be the IRS, don’t give them your personal info. Instead, hang up and call the IRS directly to check.

3. Identity Theft

The Scam: Identity thieves make all sorts of attempts to get your personal information, like your bank account information, social security number, and mailing address—just to get their hands on your tax refund.

How to Avoid It: Protect your personal information at all costs! The fewer the places you share it, the less likely someone will be to steal your refund.

4. Return Preparer Fraud

The Scam: Most tax preparers have your best interests at heart, but a few fraudsters pass themselves off as tax preparers in order to scam their clients.

How to Avoid It: Look up any tax preparer online. Chances are good you can tell the difference between a legitimate business and a shady one, so always be cautious.

5. Inflated Refund Claims

The Scam: Another tax prep-related scam targets people by promising huge refunds, without any sense of their financial situation beforehand.

How to Avoid It: If your tax preparer advertises only through word-of-mouth or flyers, they may not be legitimate. Reputation is important in the tax industry, so look for a good one.

6. Falsifying Income to Claim Credits

The Scam: Unscrupulous tax professionals may suggest you over or underreport your income to get certain tax credits. That’s a huge red flag, and usually will only benefit them.

How to Avoid It: File an honest claim. Steer clear of anyone who tells you to lie on your tax return, because you’ll both be committing tax fraud.

7. Falsely Padding Deductions on Returns

The Scam: Much like being asked to falsify your income, fraudulent tax preparers may ask you to inflate your expenses to pad your deductions. Typically this results in a bigger payment for them.

How to Avoid It: Report your income and expenses accurately, and you won’t run the risk of committing tax fraud.

8. Fake Charities

The Scam: Charitable giving is good for deductions ad good for the soul! Be wary before you donate, because some scammers create dummy charities with misspellings or similar-sounding names to well-known ones.

How to Avoid It: Research before you donate. Double-check spelling and check the web address of the site you’re visiting and make sure your money ends up in the right hands!

9. Excessive Claims for Business Credits

The Scam: We’ve covered this for individual returns, but the IRS calls out the fuel tax credit and research credit specifically. You may try to apply them to your business, but it’s a lot less likely than you may realize.

How to Avoid It: If you’ve hired a tax prep company to handle your business return, ensure you have the correct records and ask them which credits genuinely apply to your situation.

10. Offshore Tax Avoidance

The Scam: If you or someone you know thinks the best way to protect your money is to hide it offshore, think again. The IRS is wise to this strategy.

How to Avoid It: Steer clear of offshore tax avoidance. Ensure you’re keeping up-to-date with your tax obligations, and keep your money in the usual (domestic) places.

11. Frivolous Tax Arguments

The Scam: The penalty for a frivolous tax return is $5,000, which may happen if you make an outlandish claim—like being a sovereign nation—to avoid paying taxes

How to Avoid It: Frivolous tax arguments are a fool’s errand, so just file the appropriate tax return. It will save you money and save everyone time.

12. Abusive Tax Shelters

The Scam: Some scammers pitch complex tax structures, claiming that they’ll hide your earnings from the IRS and you won’t need to pay taxes.

How to Avoid It: Watch out for terms like “trust” or “syndicated conservation easements,” which are often associated with these abusive structures. If it sounds too good to be true, it probably is.

Steering Clear of Scams in 2019

If you’ve made it through this whirlwind of scams, we applaud you!

We’re not trying to scare you; you’re unlikely to cross too many of these scams in your financial lifetime. We simply hope you feel confident in your ability to spot the biggest tax scams of 2019.

By focusing on filing an honest tax return and partnering with only legitimate tax preparers, you can avoid most of them—and prove you’re smarter than even the savviest scammer at every turn.

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