4 Common Tax Season Scams — And How to Avoid Them

4 Common Tax Season Scams — And How to Avoid Them
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When tax season rolls around, there are plenty of scammers waiting to take advantage of consumers. From sky-high tax preparation fees to outright tax scams, fraudsters are increasingly sophisticated.

Each year, thieves and criminals hoodwink millions of people. Tax season is a golden opportunity to make money and prey on unsuspecting individuals; many are easy targets because they were too trusting or too intimidated by tax lingo.

By being aware of their tactics, you can get through tax season unscathed. Here are four common scams and how to avoid them.

1. Tax Preparer Fraud

Many people pose as fake tax preparers to take advantage of customers. Faux preparers promise big refunds and instant payouts, and prey on disadvantaged people, such as the elderly or low-income families.

With tax preparer fraud, they often will file your return but will file it with inflated and inaccurate numbers to get a big refund -- of which they take the majority. When the IRS discovers the error, you are responsible for paying back the refund, even if you had a professional handle your taxes.

Services that charge a percentage of your refund, rather than a flat fee, are a major red flag. The tax preparer has a financial incentive to fudge your returns to get the biggest refund possible.

Always review a return personally to ensure the information is accurate, particularly when it comes to your deductions and income claims. If the refund amount seems too good to be true, it probably is.

2. Ridiculous Tax Preparation Fees

As mentioned above, quick tax preparation shops pop up every year, many of them unlicensed and untrained. To get your refund, you end up paying exorbitant tax preparation fees -- meaning, scammers might end up with huge percentages of your refund. While you may need the cash, you can lose out on thousands by relying on these services.

If you use a reputable tax preparer, you can access your refund in just one week. That small delay can help ensure you receive all of the money you deserve.

You can also take advantage of free filing sites for your annual return.

3. Telephone Scams

One of the most effective hustles is a telephone scam. Victims will receive a call from someone pretending to be an IRS representative who says that the individual owes thousands of dollars in taxes and risks going to jail if they don’t pay. They may even threaten you with legal action.

These calls can be convincing. The caller may have your social security number, your address and know where you work. There might even be background noise that makes it sound like they’re calling from a legitimate call center.

Once the victim hangs up, they may get another call, purportedly from the police, in order to make the scammer’s claim seem legitimate. The scammer may even be able to rig the call so the phone number appears as the police station on caller I.D.

If you get one of these calls, do not respond and hang up immediately. Keep in mind the IRS does not call about owed taxes out of the blue, nor will they threaten you with deportation or legal action. The IRS will not ask for payment via debit card, gift card or wire transfer; if you do owe money, they will send you a notification in the mail.

As tax season continues, report any fraudulent calls to the Treasury Inspector General at 1-800-366-4484.

4. Phishing

Phishing is when a bogus company sends you emails or sets up a fake website that looks like an official tax preparation service or the IRS’ page. They may claim you messed up your return, forgot to enter income information or missed out on your refund. They’ll prompt you to enter your information to “correct the mistake,” but it’s just a ploy to get your personal information.

Once they have your information, they can steal your identity. They can file a tax return in your name -- and claim your refund -- or open a line of credit.

Double check all emails and websites before you click to make sure it’s the real deal. If you’re not sure, open a new window and search for the tax preparation service’s phone number -- don’t use the number listed on the email or potentially fake site. Remember, the IRS will communicate via regular mail, not email.

How to Avoid Tax Preparation Scams

Tax season is stressful enough on its own without worrying about inflated tax preparation fees or other scams. By being aware of some of the most common scams, you can be prepared to handle them if they happen to you. When in doubt, proceed with caution, and call the IRS directly if you are not sure if a communication is legitimate.

For more information on taxes, check out this article on how to boost your taxes before you file.

Your Turn: Have you experienced any of these tax season scams?

This post originally appeared on Student Loan Hero.