Don't Get Scammed!

Sophie Jing Liu, Tax Associate

Recently one of our nonresident clients received a spam email.  The email appeared to be from the IRS involving a tax issue and was asking for personal information from the taxpayer.  It asked the taxpayer to complete Form W-8BEN, which is a common form for nonresident aliens who have U.S. tax withholding, and return it to the IRS.  The email was not from the IRS.  This sort of email should be disregarded, and one should never click on any link provided.  This is actually criminal activity involving serious tax fraud.  We want to remind our clients to be very cautious when viewing e-mails or receiving telephone calls regarding tax issues from outside sources.  According to our research, individuals, rather than corporations, are subject to more of this type of fraud.  Tax scams are especially more common during tax season (January 1 – April 15).  Every year the IRS compiles a list known as the Dirty Dozen that highlights a number of common tax scams.  This article focuses on some of those different tax scams and suggestions on how to avoid them.

Email Phishing Scam
Criminals pose as the IRS or well-known organization and develop websites that lure taxpayers to give personal information, such as passports, Social Security numbers and bankcard information.  They are more likely to disclose taxpayers’ personal data to third parties.  Please note that the IRS never initiates contact with taxpayers by email to request personal or financial information.  Do not click on any emails claiming to be from the IRS.  Try to think about how the sender of the email would have your email address in the first place.  This is not information reported on a return that is filed with the IRS.

If you get a phishing email, here is some advice from the IRS:

• Don’t reply to the message.
• Don’t give out your personal or financial information.
• Forward the email to [email protected].  Then delete it.
• Don’t open any attachments or click on any links as they may have malicious code that will infect your computer.

Telephone Scam
There are also telephone scams by criminals pretending to be employees of the IRS and calling in order to get money from their targets.  They may know a lot about their targets, and they usually use fake names and alter the caller ID to make it look like the IRS is calling.  Sometimes they trick taxpayers into sharing private information or paying immediate tax due.  If no one answers the phone, the scammers often leave an “urgent” callback request.  This is very common and annoying.  The IRS always will mail a bill before calling, and it will never call to demand immediate payment and ask for credit or debit card numbers over the phone.

If you don’t owe taxes:

• Use the “IRS Impersonation Scam Reporting” web page to report the incident.
• You should also report it to the Federal Trade Commission. Use the “FTC Complaint Assistant” on FTC.gov.  Please add “IRS Telephone Scam” to the comments of your report.

If you think you may owe taxes:

• Ask for a call back number and an employee badge number.
• Call the IRS.

Tax Preparer Phishing Scam
Another common “Dirty Dozen” tax scam is the unscrupulous return preparer.  Some dishonest preparers provide taxpayers with2 inappropriate service on purpose.  Their main objective is to make money.  For example, a well-meaning taxpayer can be misled by preparers who direct them to take deductions or credits to which they are not entitled, which may lead to a larger refund.  Another situation is that some tax preparers perpetrate identity theft by disclosing taxpayers’ personal information to third parties for money.  So as a general suggestion, we encourage taxpayers to select qualified and responsible tax preparers who have good reputation.  A referral from family or close friend might lead to reliable tax return preparer.

Fake Charity Scam
Fake charity scam is also one of the “Dirty Dozen”.  Fake charities try to take advantage of people’s generosity and compassion for others in need.  Scammers will steal your money by using names that are very similar to those legitimate or well-known charities.  Fake charities operate in some different ways.  You may be approached in a public place or at your front door by people collecting money.  A fake website may look almost identical to a legitimate charity site, changing only details of where to send donations.

Here are some tips to help spot charity scams:

• If you are approached by an unfamiliar charity, check it out.  Legitimate charities are registered with the Charity Commission and print their registration details on all documentation, collection bags, envelopes etc.  You can call the Charity Commission to confirm they are authentic or check an organization’s credential online.
• Be especially cautious after natural disasters or emergencies, such as flood, earthquakes or donation to some patients having fatal disease.  Scammers take advantage of those situations to get money from people who want to aid the victims or help children who are ill.  They may contact people by telephone or email to solicit money or financial information.
• If you are asked to provide a cash donation as they don’t accept cheques, be careful.  For security and tax record purpose, write a check to the charity – not to the person standing in front of you.  Never give bank information.  Get a receipt with the name of the charity on it.
• Be cautious about getting a charity donation request by email.  Don’t open suspicious or unsolicited emails – delete them.  Don’t click or open an attachment.  It may be harmful to your computer system.
• If you are approached by a street collector, ask for their identification.  If you have any doubts about who they are, do not pay.  Always ask for details about the charity, such as their address and what they do.
• The best way to avoid charity scams is to decide in advance which charities you want to support and contact them directly.

Conclusion
Protecting taxpayers from tax scams is a complicated process.  It not only requires taxpayers to be cautious and educated, but also requires the government or organizations to be efficient and responsible.  The IRS has already taken some measures to help protect taxpayers from tax scams.  There is a big public awareness campaign created by the IRS.  It includes YouTube videos and tax tips to protect taxpayers from tax scams.  It is a good way for taxpayers to learn and get some valuable insight about tax issues.  From taxpayers’ perspective, although tax fraud can be punishable by both civil and criminal penalties, learning some basic tips to avoid revealing personal information to unknown sources may result in you avoiding identity theft.  Spread the word to your friends and family to protect themselves.  If you have questions about suspicious tax criminal activity please contact us or your own tax preparer.