How Physicians Can Protect Themselves Against Tax Fraud

Tax fraud is rampant, and doctors are a targeted group. Here are steps physicians can take to lower the risks

Tax fraud is an ongoing battle for both U.S. citizens and the IRS. Victims often unknowingly share too much personal information that leads to the filing of fraudulent returns—or they provide false data on their returns after receiving bad advice. 

According to a report from the Treasury Inspector General for Tax Administration, there were 30,038 tax returns with approximately $135.6 million claimed in fraudulent refunds as of February 29, 2020.

Doctors are particularly vulnerable to tax schemes. As large earners, hackers target physicians in efforts to steal their tax refunds or engage in other activities that lead to financial gain. Some speculate—especially in years like 2014, when numerous doctors were attacked—that many physicians experience tax fraud because of medical database breaches. 

Stay ahead of the game by learning how to protect yourself against tax fraud.

1. Know the most common attack methods

First, familiarize yourself with how attackers generally commit these crimes. The following approaches are common:

• Identity theft and fraudulent returns. A standard method for tax criminals involves stealing your personal information so they can submit fraudulent tax returns. 
• Phishing. Fraudsters often send out communications that appear to be from organizations like the IRS. Be wary of any email or website asking you for your personal information—the IRS will not contact you via email, text message, or social media about your tax refund. 
• Preparer fraud. Unfortunately, some people who claim to help you prepare your taxes are looking for ways to scam you and steal your identity or engage in refund fraud. 
• False promises. If someone advises you to falsely inflate your income or expenses to qualify for deductions, it is likely a scam. 
• Phone calls (aka “Vishing”). Just as attackers will try to email you posing as a legitimate entity, they will also call you to try to get your information or convince you that you need to deal with a tax issue immediately.

Watch out for these tax scam methods and attempts to steal your personal information. Be especially wary of sharing details like your Social Security number.

2. Understand your responsibility 

If you decide to follow bad advice, whether inflating your income or expenses or providing other fraudulent information on your tax return, you and you alone are legally responsible for that false data. It might seem unfair if you were acting on guidance you thought you could trust. But unfortunately, you’re still the party that lied.

If you work with an abusive tax return preparer, for example, that person could defraud you, and you’re ultimately still responsible for the tax return information you provided. Always be cautious when choosing someone to help you prepare taxes.

3. Be aware of the other risks of identity theft

When someone steals your identity for tax fraud purposes, there are other ways the information could be used to harm your practice. Attackers may not stop with taxes and also gain access to your financial accounts. One sign that someone else is using your identity is if you receive more credit card offers than usual.

Avoiding giving out your personal information to sites, organizations, or individuals you cannot verify is essential to reduce your risk of tax-related fraud—and it’s also crucial for other areas of your life and medical practice. 

4. Check your tax records

The IRS website has a resource called Get Transcript that allows you to search for your tax records. Doctors should especially review their tax records to ensure they have not been an unknowing victim of fraud.

Also, keep an eye on all bank and credit card statements and any changes to your credit score.

5. File your taxes as early as you can

Another step you can take to prevent tax fraud is to file as early as possible in the year. When you have all the relevant tax forms needed, don’t waste any time. Filing quickly will reduce the risk of someone filing dishonestly before you can send your legitimate return. If you submit the documents first, the second fraudulent return will be rejected.

Tax fraud is a serious issue for physicians. But you can reduce your risk by understanding how it usually occurs and implementing these steps to protect yourself. 

Always work with a tax professional you can trust. The team at Provident CPA and Business Advisors can assist you with questions, help you protect your assets, and optimize tax-related aspects of your medical practice. Contact us today to learn more.