What to know about IRS impostors and tax preparation fraud

Special to The Dallas Examiner

The season for filing 2022 taxes began Monday. And while some Texas residents are planning on submitting their own returns, others are reaching out to reputable tax preparers for assistance. With roughly three months remaining until the filing deadline of April 18 for general tax returns, Better Business Bureau reminds residents to be wary of con artists and unethical businesses who claim to specialize in tax preparation.

The IRS continues to aggressively prosecute instances of criminal tax fraud across the nation, with $5.7 billion in tax fraud identified in 2022. The IRS’s Criminal Investigation’s 2022 Annual Report highlights multiple instances of tax fraud in Texas, including a former mayor of Richardson, a business owner in Midland, a tax preparer in Houston and a hotel manager in Austin. The Houston tax preparer was sentenced to three years in prison for preparing income tax returns for himself and others that falsely claimed business losses, unreimbursed employee expenses, itemized deductions and gifts by cash or check.

As consumers gather their tax documents and plan to file their 2022 taxes this year, Better Business Bureau expects an increase in rates of IRS impostor and phishing scams, as well as reports of ghost tax preparers.

IRS impostor and phishing scams

Impostor scams remain one of the most common types of fraud reported to the FTC by Texas residents, with over 30,000 reports in the first three quarters of 2022. Across the U.S., impostor scams account for $2 billion in losses, far exceeding losses to online shopping, employment and lottery scams combined. IRS impostors target tax filers and tax preparation businesses, often claiming the recipient must take immediate action or confirm account details.

IRS impostor scams are carried out through unsolicited phone calls and emails, including students, faculty and staff at educational institutions with a ‘.edu’ email address. Emails often display the IRS logo and encourage recipients to follow a link to verify their tax refund payment by entering personal information, such as their SSN, date of birth and current address, on a lookalike website. The website is a phishing scam, and the information provided could lead to identity theft or Stolen Identity Refund Fraud.

Remember, the IRS will never:

• Demand immediate payment using a specific payment method such as a prepaid debit card, gift card or wire transfer.
• Threaten to immediately contact local police or other law enforcement to have the taxpayer arrested for not paying.
• Demand that taxes be paid without allowing taxpayers to appeal the amount owed.
• Unexpectedly call about a tax refund.
• Send emails about your tax refund or sensitive personal information.
• Initiate contact with taxpayers by email, text message or social media to request personal or financial information.

Ghost tax preparer scams

A ghost preparer is an individual who advertises themselves as a professional tax preparer, often guaranteeing a significant tax return when using their services. However, the preparer either refuses or conveniently “forgets” to sign the return they created on behalf of a client.

By federal law, anyone paid to prepare or assists in preparing a federal tax return must have a valid Preparer Tax Identification Number. Tax preparers must sign and include their PTIN on any returns they create on behalf of a paying customer. Businesses or individuals refusing to sign a return is a red flag that they may be fraudulent, leaving the consumer to deal with the IRS in the aftermath of an illegitimate or incorrect filing. Filing a valid, accurate tax return is ultimately the taxpayer’s responsibility, emphasizing the importance of choosing a credible tax preparation professional.

It is important to carefully analyze a chosen tax preparation business due to the sensitive personal information provided, such as SSN, bank account information, home address and financial assets. BBB recommends spending the time to research tax preparation professionals to determine their credibility and legitimacy. The IRS provides a directory service that lists preparers in a searchable area who currently hold professional credentials recognized by the agency. Additionally, use available resources, such as BBB.org, to search for accredited tax preparation businesses.

Individuals impacted by tax preparer misconduct can file a report with the IRS at IRS.gov/tax-professionals and are encouraged to file an official complaint on the business’s BBB Business Profile, as well as submit a report to BBB Scam Tracker.

For more information about how to avoid tax scams and choose the right tax preparer, visit https://www.bbb.org/taxtips.

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