May 23, 2024

Beware of Tax Scams: How to Protect Yourself and Your Business

Tax season can be a stressful time for both individual taxpayers and small business owners. Unfortunately, it also presents an opportunity for scammers to take advantage of unsuspecting filers. The IRS has recently issued a warning about a surge in fraudulent schemes that target taxpayers by promising large refunds based on misleading advice and false claims. Here is some information to shed light on these scams and provide practical steps to help you protect yourself and your business.

Understanding the Scams

The IRS has identified several key areas where scammers are targeting taxpayers:

  1. Fuel Tax Credit Fraud: The fuel tax credit is intended for off-highway business use or farming. However, scammers are advising taxpayers who do not qualify to claim this credit, leading to inflated refunds.
  2. Sick and Family Leave Credit Fraud: Similar schemes involve false claims for sick and family leave credits, which were designed to provide relief during the COVID-19 pandemic. Unscrupulous preparers are exploiting these credits to generate large refunds unlawfully.
  3. Household Employment Tax Fraud: Scammers are encouraging individuals to file false claims related to household employment taxes, misleading taxpayers into believing they qualify for credits or refunds that they are not entitled to.

The Risks of Falling for Scams

Falling for these scams can have serious consequences. Not only might you be required to repay any falsely obtained refunds, but you could also face substantial penalties and interest. The IRS is vigilant in identifying fraudulent claims and has sophisticated systems in place to detect inconsistencies and anomalies in tax filings. If you’re found to have submitted false claims, whether knowingly or not, you could be subject to audits and legal action.

How to Spot a Scam

Being able to recognize a scam is crucial in protecting yourself and your business. Here are some red flags to watch out for:

  • Promises of Large Refunds: Be wary of any tax preparer who guarantees a substantial refund without thoroughly reviewing your financial situation.
  • Unsolicited Offers: If you receive unsolicited communication from someone claiming to be able to secure you a large refund, it’s likely a scam.
  • Requests for Personal Information: Scammers often ask for sensitive information, such as your Social Security number or banking details, under the guise of processing your refund.
  • Pressure to Act Quickly: Scammers may try to create a sense of urgency, pressuring you to act quickly without giving you time to verify their claims or consult with a trusted professional.

Protecting Yourself and Your Business

To safeguard against these scams, follow these steps:

  1. Verify Credentials: Ensure that your tax preparer is reputable and has the necessary credentials. Look for professionals who are Enrolled Agents, Certified Public Accountants (CPAs), or attorneys with specialization in tax law.  The IRS has a list of all credentialed professionals available here.
  2. Check for Red Flags: Be cautious if your preparer suggests claiming credits or deductions that you haven’t previously been eligible for, especially if they can’t provide a clear and legal explanation.
  3. Use IRS Resources: The IRS offers resources and tools to help you verify the legitimacy of tax credits and deductions. Use the IRS website to research any claims that seem suspicious.
  4. Keep Detailed Records: Maintain thorough records of all your financial transactions, receipts, and correspondence with your tax preparer. This documentation can be crucial if your return is audited.
  5. Educate Yourself: Stay informed about common tax scams and the legitimate credits and deductions available to you. The more you know, the harder it will be for scammers to deceive you.

Seeking Professional Help

Navigating the complexities of tax laws can be challenging, and it’s understandable that many taxpayers turn to professionals for assistance. However, it’s essential to choose a trustworthy and knowledgeable tax preparer. At Heritage Tax Company, we pride ourselves on providing accurate, ethical, and personalized tax services. We are committed to helping you maximize your legitimate tax benefits while ensuring compliance with all tax laws.

Book a Consultation

If you have concerns about your past tax filings or need assistance with your current tax situation, we invite you to book a consultation with our experienced team. We can review your returns, provide guidance on legitimate credits and deductions, and help you avoid falling victim to scams.

Protect yourself and your business from tax scams. Book a consultation with Heritage Tax Company today: Schedule a Consultation.