If you have an email account, I am sure you have received the message looking for your help to transfer $10,000,000 which belongs to the window of a former government official. As much as I would like to think everyone has heard of this one and is smart enough to stay away, you better believe the crooks behind this scam would not keep sending out the email, unless it was working. In fact ConsumerAffairs.com estimates that 7 1/2 percent of Americans loose money each year due to financial fraud.
The Internal Revenue Service has been especially active in recent years combating financial fraud and identity theft. Probably because a lot of financial scams actually involve peoples tax returns and tax information. Just having the basic information on your tax return, can be like a key for a crook to unlock your credit and financial information and use that to scam money from you and others.
Here are some common financial scams that you should be aware of:
Tax return preparer fraud – This one hits close to home because I prepare tax returns professionally, but unfortunately there are unscrupulous return preparers who will promise you unbelievably large tax refunds. They do this by making up outrageous tax deductions, even creating fake businesses with large losses for W-2 employees or creating bogus charitable deductions. Be cautious if a return preparer charges a percentage of the refund they are able to get for you and ask to see their Preparer Tax ID Number or PTIN. Everyone who prepares tax returns professionally is required to obtain a PTIN from the IRS and beginning in 2012, they will be required to pass a competency examination if they are not already a CPA, attorney or Enrolled Agent.
Phishing – The email about the wealthy window falls in this category. Even more common now are emails that would appear to be from your bank or the IRS. The emails typically will ask for certain personal information, such as you social security number or they may include a link to ask you to log in to your online banking to keep your account from being locked. There has also been an increase in emails that appear to be from the IRS telling you that you are due a refund and you just need to provide them your social security number and some information from last year’s tax return to get the money. Trust me when I tell you that the IRS already knows your social security number and has no reason to ask you for it.
Hide your money offshore – This one definitely falls into the too good to be true bucket. There has been a lot in the news lately about how wealthy individuals are using bank accounts in foreign countries to avoid paying income tax on those funds. The crooks watch the news now and they are looking to help the little man reap the same benefits as the wealthy, or at least that is what they want you to believe. There is nothing wrong with investing your money in a foreign bank account, but in most cases you do have to report those funds to the IRS every year and be sure you are working with a reputable foreign bank or not only will the IRS never see that money again, neither will you.
You can learn more by reading about the IRS list of “Dirty Dozen Tax Scams.” Remember what your mom told you: “if something looks too good to be true, it probably is.”