Sacramento, California - With Tax Day fast approaching on April 18, 2016, Attorney General Kamala D. Harris today issued a consumer alert, advising taxpayers to be wary of schemes targeting hardworking Californians during this tax season. Each year, millions of California taxpayers file their taxes and many look forward to receiving tax refunds. Unfortunately, tax season also draws scam artists who prey on individuals who may need help with filing their taxes.
This alert explains some of the most common tax season scams and provides resources to help Californians find reputable tax help.
In addition to this written alert, Attorney General Harris has also released the second in a “Consumer Spotlight” audio series highlighting consumer issues across the state. This radio story focuses on Tax Season Scams and includes one Californian’s story about a tax impersonation scam, discussion of other common tax season concerns, and resources to find tax help.
COMMON TAX SEASON SCAMS
IRS Impersonation Scams
One of the most common scams begins with an unsolicited call or email from a person claiming to represent the IRS. Sometimes the caller will claim to have information about an unexpected tax refund. Other “representatives” may demand immediate payment of a phony tax bill, threatening that the consumer will be sued or even arrested if she does not comply. Consumers should hang up the phone or delete the email because the IRS does not initiate contact with taxpayers by telephone or email, nor does it demand immediate payment without first offering the taxpayer the opportunity to appeal. Seniors and immigrants in particular may be targeted by these scams, and should exercise caution.
Tax Preparation Scams
Consumers should also be on the lookout for dishonest tax preparers. Some deceptive preparers may falsify returns in order to claim an inflated refund, only to keep portions of the inflated refund for themselves. Others may steal the taxpayer’s identity and use it to file a completely fraudulent return. Finally, as the implementation of the Affordable Care Act continues, consumers should look out for a new scam in which tax preparers incorrectly tell consumers they owe a health coverage penalty that they must pay to the preparer.
Unnecessary High Cost Products
Consumers should also steer clear of high-cost products that allow them to pay the cost of tax preparation out of their refund. These Refund Transfers or Refund Anticipation Checks do not get consumers a faster refund and generally have triple-digit annual interest rates.
TAX SEASON TIPS
While the overwhelming majority of tax professionals are honest, the tips below can help consumers avoid the deceitful ones. Free tax preparation assistance is also available for seniors, the disabled, individuals whose first language is not English, and people with incomes under $54,000. Individuals who qualify for free assistance should start by visiting the IRS website to find free tax prep help near you. Those who do not qualify for free assistance should follow these tips when searching for a legitimate tax preparer.
- Look for a tax preparer with a longstanding presence and trustworthy reputation in the community.
- Always verify that the tax preparer is either registered with the state or exempt from registration because he or she is an attorney, a certified public accountant, or an IRS-enrolled agent. Visit the California Tax Education Council’s website to check a preparer’s status and for more information about registration and exemption requirements.
- Make certain the preparer has a valid IRS Preparer Tax Identification Number (PTIN). Use the IRS Directory of Federal Tax Return Preparers to research tax professionals.
- Beware of suggestions that a tax preparer will exploit hidden loopholes or uncover little-known deductions to obtain a bigger refund than the competition. As a taxpayer you are responsible for the return that you file, so do not allow scammers to coax you into falsifying information. If a promise seems too good to be true, it probably is.
- Always review a tax return before signing it and watch out for suspicious signs like too many dependents claimed or tax credits that do not seem applicable or have not been clearly explained. And never, ever sign a blank return.
- Keep a copy of the return. Honest preparers should provide copies of the return that may be needed for future reference or to answer questions from the IRS.
- Review the IRS Tips on “How to Select an Income Tax Return Preparer.”
ADDITIONAL RESOURCES FOR CALIFORNIA TAXPAYERS
- Free tax assistance is widely available through the IRS Volunteer Income Tax Assistance (VITA) program for taxpayers with disabilities or limited English proficiency, as well as those with incomes under $54,000. Visit the VITA website for more information.
- The Tax Counseling for the Elderly (TCE) program also offers free services focusing on issues affecting seniors. Visit the TCE program website for more information.
- Visit the IRS website for more information on finding free tax help.
- Both the IRS and the Treasury Inspector General for Tax Administration maintain informative websites with detailed information on the latest scams.
- Consumers can report suspected tax scams to the Office of the Attorney General. To submit a complaint, please use one of the following forms: