How Entrepreneurs Can Avoid IRS Tax Scams
IRS tax scams continue to occur every year, and scammers update their tactics to be more sophisticated. As an entrepreneur, here’s how to steer clear of these frauds
One of the most common types of scams out there is related to alleged tax crimes. These scammers take advantage of the fact that taxes are complicated and that many Americans may not fully understand all laws and regulations and what’s expected of them.
And for entrepreneurs—whether they’re business owners or freelancers—taxes can be an even more complex process to deal with each year. Because of common insecurities about taxes and owing money to the IRS, many individuals are often more vulnerable to attempts at fraud.
It’s important to know the warning signs and to be prepared to detect when you’re being tricked. Here’s more information about what to look for and what you can do if you find yourself in trouble:
Where do scammers usually start?
According to the IRS, the most common type of tax scams occur over the phone or via email, when the scammer pretends to be a representative from the IRS and demands that the person pay up or provide personal information. Email fraudsters will often use the IRS logo and even fake IRS badge numbers to try to look legitimate.
How to detect the warning signs
First of all, the IRS says it would never leave a recorded message that is “urgent or threatening” regarding a tax issue. And it will not call taxpayers if they owe money until the organization has already sent a bill via the regular mail service.
The IRS warns that some of these voicemail messages will claim that the victim will be subject to arrest if they don’t respond. Because callers can get fake numbers to appear on your caller ID, it can be hard to know who is calling from where especially if you recognize the area code and think it is just a normal call.
With email messages, it’s the same story—the IRS doesn’t reach out to taxpayers via email asking for any kind of personal information. While they do occasionally call a taxpayer or visit their home, this is due to overdue or delinquent tax returns or other tax issues that may involve an investigation.
It’s important to be wary of any phone or email message that you receive from someone claiming to be from the IRS. They’ll often ask you to provide your bank account information or personal information in attempts to steal money and identities.
- Make demands about payment via these methods and without giving the taxpayer the opportunity to appeal or question what is owed
- Require payment in one specific way
- Ask for payment information over the phone (e.g., credit or debit card number)
- Threaten arrest
- Threaten legal action
These methods are simply not the way the IRS notifies taxpayers about issues, so if you experience any of the above, you are dealing with a scammer.
Recent tax crimes to be aware of
The IRS cites two examples of recent tax scams they’re been dealing with. One relates to social security numbers, where the scammer claims that a victim’s SSN could be suspended or canceled. They take a similar approach to the IRS impersonation methods mentioned above.
The other happens when scammers pretend to be from a fake tax agency called “The Bureau of Tax Enforcement” or something similar. This is not, of course, a real entity.
It’s important to be aware of these two new developments in tax scamming, and to be on the lookout for similar attempts that will likely arise in the next year.
What to do if you are a victim of a tax scam attempt
If one of these scams happens to you, the IRS has a reporting method. You can send any emails from scammers pretending to be the IRS to firstname.lastname@example.org.
And if you’ve fallen for fraud and lost any money because of one of these incidents, the IRS suggests reporting it to the Treasury Inspector General Administration and to also file a complaint with the Federal Trade Commission.
The IRS also has a webpage that covers the ins and outs of what kind of tax fraud activity you may have experienced and the steps you should take next.
Provident CPA & Business Advisors serves successful professionals, entrepreneurs, and investors who want to get more out of their business and work less, so they can make a positive impact in their lives and communities. Typically, our clients reduce their taxes by 20 percent or more and create tax-free wealth for life. Contact us for expert advice on tax planning and business strategy, and to find out how we can help your business exceed your expectations.