A smiling woman works on her laptop on her apartment floor while staying protected from tax scams with Gate City Bank

5 Ways to Avoid Tax Scams & Safeguard Your Finances.

Whether you prepare taxes on your own or through a professional service, it’s crucial to beware of common scams designed to compromise your personal and financial information.

While tax season is undoubtedly a busy time for law-abiding citizens scrambling to file their paperwork, the same can be said for criminals who are working tirelessly with other motives in mind. From impersonating the IRS to masquerading as a CPA and everything in between, these scammers are willing to go to taxing lengths to steal your hard-earned money.

But you can fight back, starting with the basics of protecting yourself.

Entering the Mind of a Tax Scammer.

Handling taxes is a stressful endeavor for some, with the fear of a fine, penalty or IRA audit looming over their heads. Fraudsters feed on this unease, using clever social engineering tactics to snatch sensitive information so they can file fake tax returns and claim the resulting refunds. Alternatively, if they pose as a CPA, they’ll likely aim to sneak their bank account number onto your tax return.

And the deviousness doesn’t stop there! Fraudsters might even have the audacity to charge you ridiculous fees while claiming they can settle your tax debt. Or they’ll pretend to be new clients, then deploy malicious links to infect an accountant’s devices and gain access to their databases. Given the opportunity, scammers might even use an accountant’s systems to file fake returns.

The various flavors of fraud are seemingly endless, but you can stay protected with a handful of practical tactics – especially during tax time.

  1. Know the red flags

    When it comes to tax scams, it’s crucial to be able to recognize the telltale signs. Like when a scammer inflicts a sense of urgency, pressuring you to act quickly to avoid fines, lawsuits, jail time or deportation. Real tax officials won’t make these threats. They also won’t contact you via phone, text, email or social media. They’ll likely use direct mail, and they’ll never ask for your personal or financial information.

    Fraudsters also like to request payment in the form of gift cards, cryptocurrency and wire transfers. Don’t take the bait! Additionally, be on the lookout for poor grammar, misspelled words and a harsh demeanor, and only work with tax professionals and tax-preparation websites that have a valid preparer tax identification number (PTIN). This number and a CPA’s signature must be included on a tax return.

Pro Tip:

Gate City Bank will never ask for sensitive information like your password, account number or Social Security number. If you’re ever in doubt, hang up the phone or don’t respond, and contact your bank or the IRS directly to ensure the request is legitimate.

  1. Remember the three Ps: prompt, protect & PIN

    Prompt: Aim to be prompt in filing your taxes – before someone has the chance to impersonate you! The sooner you file, the less time fraudsters have to make their move.

    Protect: Additionally, it’s important to protect tax forms like your W-2, which contain sensitive information. Lock physical copies in a secure place, don’t make more copies than necessary and deliver files in a secure manner. If you’re filing taxes on your own, avoid public Wi-Fi and consider safeguarding your devices with strong passwords, multi-factor authentication, security software and a virtual private network (VPN).

    PIN: Thirdly, make sure to strengthen your identity protection with a personal identification number (PIN). Generated annually, the IRS uses this six-digit number to verify your identity. Requesting a PIN is quick, easy and free. But stay alert! Scammers are out to snatch this number, as well, so keep an eye out for questionable communications requesting it. Save for including your PIN when filing your tax return, the IRS will never ask for it.

  2. V-e-t your CPA

    It’s crucial to do your research before working with a tax professional or service. Consider asking friends and family for recommendations, and seek out a business that will encrypt your information and protect it with enhanced physical security measures at their location. Note: Tax professionals worth their salt will ideally request that you upload any sensitive tax documents using a secure platform.

  3. Direct deposit your refund

    Instead of requesting refund checks, have your tax refund deposited directly into your bank account. This is because checks can be delayed, lost or stolen. By skipping the headaches and using direct deposit, you’ll enjoy better peace of mind.

  4. Stay updated on the hustler’s handbook

    Arm yourself with knowledge! A great way to do so is to keep up-to-date with the IRS’ Dirty Dozen list, which is compiled annually and outlines the top scams that peak during tax season.

Tell Tax Scams to Scram.

By following these five best practices, you’ll be on your way to staying safe from fraud. And when in doubt, if something feels like it could be a scam, consider contacting the IRS and local authorities. By staying alert, you can ensure your taxes are filed safely and securely – For a Better Way of Life.®

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Please consult with a tax professional to learn more.