Navigating the Perils of Tax Season: A Guide to Avoiding Fraud and Safeguarding Your Finances

March 21, 2024

Navigating the Perils of Tax Season: A Guide to Avoiding Fraud and Safeguarding Your Finances

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By Christine Brunner, CPA, CFE, MAcc | Chief Executive Officer | Brunner Sierra Group

As the tax season approaches, individuals and businesses brace themselves not only for the arduous task of filing returns but also for the increased risk of falling victim to tax-related crimes. The complexity of tax laws, combined with the rise of digital tax filing methods such as TurboTax, has unfortunately paved the way for a plethora of fraudulent activities aimed at unsuspecting taxpayers. Understanding the nature of these crimes and implementing strategies to protect oneself is crucial in this digitally driven era.

Common Tax-Related Crimes During Tax Season

  1. Identity Theft: One of the most prevalent tax season crimes involves fraudsters stealing personal information to file tax returns in someone else's name, claiming a fraudulent refund in the process. This not only leads to financial loss for the victim but also creates a bureaucratic nightmare in proving the fraud and rectifying one's tax records.
  2. Phishing Scams: Taxpayers receive emails or text messages pretending to be from legitimate entities such as the IRS or tax preparation services. These messages aim to lure individuals into revealing personal information or clicking on malicious links that install malware to steal data.
  3. Return Preparer Fraud: Some unscrupulous tax preparers might inflate personal or business expenses, claim unallowable credits, or direct refunds to their accounts. Although rare, it's a serious breach of trust that can have significant legal repercussions for the taxpayer.
  4. Fake Charities: Around tax season, fraudsters often create bogus charitable organizations to exploit the taxpayer's desire for a tax deduction. Unsuspecting individuals donate to these fake charities, resulting in financial loss and no actual tax benefit.
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Protecting Yourself While Using At-Home Tax Software

Using at-home tax software like TurboTax has become increasingly popular due to its convenience and efficiency. However, it also necessitates heightened vigilance to protect against potential fraud. Here are some measures to safeguard yourself:

  1. Secure Your Personal Information: Always use strong, unique passwords for your tax software account and enable two-factor authentication if available. Be cautious about sharing personal information, especially on suspicious websites or unsolicited emails claiming to be from the IRS or your tax software provider.
  2. Update Your Software Regularly: Ensure that your tax software and your computer's operating system are up to date with the latest security patches. This helps protect against malware and hackers exploiting vulnerabilities.
  3. Verify Tax Preparer Credentials: If you decide to use a professional, verify their credentials. The IRS provides a directory of federal tax return preparers with credentials and select qualifications to help you choose a reputable professional.
  4. Beware of Phishing Scams: The IRS does not initiate contact with taxpayers by email, text messages, or social media channels to request personal or financial information. Be skeptical of any communications that claim to be from the IRS and report suspicious emails or calls.
  5. Monitor Your Tax Records: Regularly check your tax records on the IRS website to ensure that there are no unauthorized filings or claims. If you notice anything amiss, contact the IRS immediately to report potential identity theft.
  6. Use Reputable Tax Software: Choose tax preparation software with a strong reputation for security and customer service. Research and read reviews to ensure that the software provides adequate protection against fraud.

While tax season can be a period of heightened financial activity and corresponding risk, awareness and proactive measures can significantly mitigate the dangers of tax-related crimes. By securing personal information, staying vigilant against scams, and using reputable tax preparation services, taxpayers can navigate the tax season more safely and confidently.