Sometimes, it can be hard to tell when someone is being legitimately helpful, and when he or she is just after your hard-earned cash. It can be especially difficult to make the distinction when it comes to complex issues like taxes.
With such a large and complicated tax code, it’s not always easy to tell when someone is trying to con you. No matter what time of the year it is, you need to be on guard against faulty tax advice and scams.
Here are 4 tax scams to be wary of:
- Special Grants – You might be told that you can get a special grant by filing your taxes a certain way. A scammer might tell you that there is a complex, or little known, form that can be filled out to find out if you are eligible.There are a couple possibilities with this scam. First, you might be charged a fee up front for help filling out the form. Additionally, you might also be asked to share personal information. Your Social Security number, bank account, and other identifying information are commonly asked for on tax forms, and even some grant forms. So, the scammer might present you with an official looking form. You fill it out, and pay the fee. The scammer has the money and everything needed for identity theft.Protect yourself by realizing that you don’t apply for government grants via your tax return. Anyone who tells you that you can apply for a grant when you file your taxes is lying.
- Fudging the Numbers – Some scammers (and shady accountants) promise that they can use “insider” tricks to make it appear as though you have no income — and therefore owe no taxes. These fraudsters charge a fee for the services, but the “insider” tricks usually consist of inflating deduction amounts and under-reporting income. You end up out the money and the likely target of an audit.
- “Voluntary Pay” – It’s a complicated subject, but some scammers claim that you aren’t legally required to pay taxes if you don’t want to. They promise, in exchange for your money, to teach you the “secrets” of tax protesting and refusal to pay on legal grounds. Most of these “strategies” end up being flimsy excuses. While you probably won’t go to jail for tax evasion in these cases, you will be assessed penalties, fees, and back taxes.
- Offer in Compromise – The Offer in Compromise is a very real option the IRS offers taxpayers who can’t pay. You suggest an offer, and the IRS considers your financial situation, and assesses whether or not it can get the money another way. Most Offers in Compromise are rejected (only 37% accepted in 2012). And if you file a frivolous one, the fees can get hefty. Some scammers claim to help you get around your tax bill with an Offer in Compromise, charge you a fee, and then file the paperwork. You’re out the fee, and the IRS might come after you for a frivolous submission.
If it sounds too good to be true, it probably is. The government expects you to pay what you owe, and it expects you to pay on time. Be concerned anytime anyone claims they know a “secret” to helping you avoid your tax bill. The key thing to look out for whenever you do business with a tax relief company is how long they been in business, what their BBB rating is, and online reviews.