Optima Tax Relief provides assistance to individuals struggling with unmanageable IRS tax burdens. To assess your tax situation and determine if you qualify for tax relief, contact us for a free consultation.
Tax Season leaves many taxpayers vulnerable to identity theft and scammers.
Scammers can pose as tax preparers and steal your personal information.
Protect your social security and bank information to ensure it does not end up in the wrong hands.
Ask your tax preparer how you can avoid your personal information getting leaked if there is a data breach.
Most people don’t realize how vulnerable they are to fraud during tax season. The scary truth is that during this time of year, many identities are stolen and fraudulent tax returns are unwittingly filed on behalf of a taxpayer. In order to protect yourself, it is vital to exercise caution and provide only the documents and information that are absolutely necessary. Below are a few scams to be aware of during tax time to help avoid becoming a fraudster’s next victim.
Phone and Email Scams
The most obvious way to protect yourself against scammers is to never give out your personal information to someone you don’t know, especially over the phone. If someone from the “IRS” is attempting to contact you over the phone or by email and asks for your social security or card information, don’t give it to them. The IRS almost never contacts via phone, instead preferring to send notices via mail. Even if you do receive a call from the IRS, they won’t ask for your social security number – they already have that information. If you feel uncomfortable about the validity of a call, hang up and call the IRS yourself – that way you know if what they’re telling you is true.
Accountant fraud
Be wary of scammers who will pose as a tax preparer and then rip off customers through refund fraud or identity theft. These phony accountants will tell you that they can get you a large tax refund and typically prey on low-income and non-English speaking taxpayers.
Even if you go to a legitimate tax preparer, your information can still be exposed if there is a data breach. To avoid this happening – and being left vulnerable – ask your tax preparer what more you can do to protect your information in case of a breach.
Identity theft
Make sure to protect your social security number at all costs. Identity thieves will attempt to steal this information in order to steal not only your identity but your tax refund too. As long as you notify the IRS that your information has been compromised and your refund has been stolen, the IRS will work with you to provide your refund. However, it will take extensive time and paperwork to prove that your information was stolen.
Medical Identity Theft
Financial fraud such as a stolen credit card can be frustrating but can be quickly resolved since it’s easier to detect, and often doesn’t have significant long-term financial impacts. Medical identity fraud, on the other hand, can cost a victim $13,500 on average and be notoriously difficult to resolve. Because of advancements in electronic communication and collaboration in the healthcare industry, personal health information (PHI) is more exposed and accessible. At the same time, this doesn’t always mean that your health provider is on the same page with your insurer. PHI is rarely tracked across multiple networks and this gap can make stealing and using it feasible.
In conclusion…
Tax Season is now upon us, and it’s important to protect your personal information and ensure that it can’t be compromised. Always be wary of phone calls or emails that you receive claiming to be from the IRS, especially when they’re asking for your bank information or social security number. Also, do your research when looking for a tax preparer to file your taxes for you, and make sure they have their license, as well as positive reviews from previous clients. Lastly, make sure to monitor your social security number to ensure that your data has not been breached and your identity hasn’t been stolen.
If you need tax help, contact us for a free consultation.
Would you cheat on your taxes? If you said “no,” count yourself in the majority of people who wouldn’t commit tax fraud.
According to the Taxpayer Attitude Survey, about 87% of American Taxpayers say that it is not acceptible to cheat on taxes, while more than 95% agree that it is every American’s civic duty to pay their fair share of taxes. In addition, 91% of those surveyed agreed that everyone who cheats on their taxes should be held accountable.
Think that if you look honest, you can get away with fudging your taxes? Think again.
However, actual revenues collected by the Internal Revenue Service tell a somewhat different story. The so-called “tax gap” is defined as the difference between the total income tax liability and the amount of income tax payments that are made voluntarily and on a timely basis. This tax gap totaled $450 billion in 2008 but shrank to $385 billion after late payments were posted.
Taxpayers across the country under-reported their income by an estimated $376 billion the same year, while underpayments amounted to $46 billion, and $28 billion was owed by non-filers – people who did not complete tax returns at all. All told, the compliance rate in 2008 on the estimated $2.66 trillion tax obligation was about 83 percent.
Under-reporting Income to the IRS
Most taxpayers are diligent about paying taxes on income reported on W-2 forms. After all, the IRS receives the same information, so skipping out on paying what is owed is fairly difficult. Self-employed workers who receive 1099 forms have somewhat more latitude about how much total income they report due to legitimate business-related expenses. Nonetheless, earnings listed on 1099 forms are also reported to the IRS; therefore, most self-employed workers at least acknowledge those earnings.
On the other hand, a significant amount of cash income is never reported to the IRS. If you were paid $100 to fix someone’s computer, you will probably get by with not reporting that income. However, if you collect a cool $5,000 on the side through your online storefront, you shouldn’t expect to fly under the IRS radar if you don’t acknowledge the sum on the following year’s tax return.
Questionable Tax Deductions
There is nothing wrong with claiming every penny to which you are entitled through legitimate tax credits and deductions. This is not regarded as cheating on your taxes. If you are self-employed and you have established an authentic home office, you should absolutely claim the home office deduction. If you are a wage earner whose boss expects you to call on out-of-town clients on your own dime, go ahead and claim the deduction for work-related travel. As long as you can document your claim, you won’t be accused of tax fraud – even if you are audited by the IRS.
On the other hand, taking a vacation in Hawaii and claiming a deduction because you attended a seminar during the trip likely won’t pass muster with the IRS. Likewise, the cost of your daily commute from your home to your cubicle is also unlikely to be deductible. If you have doubts about whether a deduction or credit is legitimate, it’s best to check with a tax attorney or with a certified public accountant to avoid being accused of cheating on your taxes.
Discredited Tax Protests
A persistent movement exists among a small group of individuals who claim that federal income taxes are unconstitutional because the Sixteenth Amendment to the Constitution (which was ratified in 1913) was improperly ratified. These tax protesters insist that they are exempt from paying income taxes as a result. The IRS has repeatedly dismissed such claims, frequently charging delinquent taxpayers with filing frivolous returns.
One of the more prominent figures snagged for adhering to discredited tax protester claims is actor Wesley Snipes. Snipes was released from federal prison in 2013 after serving nearly three years for misdemeanor charges related to willfully failing to file tax returns. Snipes claimed that he was misled into believing that his actions were legal by his co-defendants, tax-protesters Eddie Kahn and Douglas Rosile. Federal prosecutors had also pursued felony charges against the three for tax fraud and conspiracy, alleging that Snipes had shipped more than $15 million overseas in an illegal bid to avoid paying taxes. Kahn and Rosile were convicted of those charges, but Snipes was acquitted.
Straight-Up Tax Scams
While the actions described above can be described as questionable claims and gray-area tax-related behavior by otherwise honest citizens, straight up tax evasion scams are also prevalent. Such tactics as strictly paying employees in cash and setting up questionable business and family trusts are among the more common tax evasion schemes attempted by both individuals and companies attempting to skirt paying income taxes.
While a case can sometimes be made for leniency concerning unwitting tax evasion, the IRS frequently takes a dim view of defendants that in its view have deliberately attempted to commit fraud. Outright scams, once uncovered by the IRS, are likely to result in criminal tax evasion charges and long prison sentences upon conviction. This contrasts with civil tax evasion, which can carry hefty fines but no jail time.
What is the Penalty for Cheating on Your Taxes?
Even if you get away with underpaying your taxes (or failing to file returns at all) for a short period, the odds are good that you will be caught eventually. The statute of limitations for federal tax audits is doubled from three to six years if you fail to report at least 25 percent of your income, or if you have income on undisclosed foreign assets that totals $5,000 or more. There is no statute of limitations on IRS audits for filing fraudulent returns or unlawfully failing to file tax returns, which means that you could be looking over your shoulder for years – or even the rest of your life.
Optima Tax Relief offers a range of tax relief services to help you prepare your taxes. Schedule a tax consultation with one of our licensed professionals today to discover how we can help you.
