5 Ways to Avoid Tax Scams

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5 Ways to Avoid Tax Scams

Follow these steps to protect your money and your identity.

I’ve heard about all sorts of scams that crop up during tax-filing season. How can I avoid getting burned?

While you’re spending time preparing your tax returns this spring, scam artists are hard at work figuring out ways to steal your money and your identity. ID thieves are particularly active during tax time because your return contains all the information they need -- your Social Security number, name, address, work information, investment accounts -- to open accounts in your name or steal your refund. “Everything is there,” says Robert Siciliano, a McAfee consultant and an ID-theft expert. But there are some simple precautions you can take to stay a step ahead of the bad guys.

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1. Never respond directly to an e-mail claiming to be from the IRS. The IRS does not send e-mails about your tax return. Period. “If the e-mail claims to be from the IRS, there’s a 100% chance that it’s a fraud,” says Siciliano. And be skeptical of e-mails claiming to be from a tax-preparation firm, too. This is prime season for phishing – when scam artists set up Web sites that ask you to input personal information or account numbers because they need more information to file your return or process your refund.

The IRS has issued an alert warning people about fraudulent e-mails that claim to come from the Electronic Federal Tax Payment System. The e-mails claim that your tax payment made through the EFTPS has been rejected and direct you to a bogus Web site containing malicious software that infects your computer.


If you get a letter or call that does appear legitimate, you should still verify the information yourself by calling the provider’s customer service number as listed on its Web site or in your files. For more information about what to do and who to contact if you receive a suspicious IRS-related communication, see the IRS phishing page.

2. Be careful whom you work with. You’re giving so much personal information to your tax preparer that you need to do a thorough job of vetting him or her first. “Scammers have been known to set up shop as accountants and collect your personal information. They’ll get your refund, but they’ll also open up new credit cards and bank accounts in your name,” says Siciliano.

Look for someone who has been in the business for a long time, and ask friends and colleagues for recommendations. You can also find a tax preparer through the National Association of Enrolled Agents, whose members must pass a rigorous test, meet annual continuing-education requirements and are licensed to represent clients in front of the IRS. If you’re looking for help with financial planning as well as taxes throughout the year, CPAs who are personal financial specialists (CPA/PFS) can help integrate tax planning with investing, retirement planning and estate issues. See the CPA/PFS search page to find one in your area. For more information, see How to Find a Good Tax Adviser.

3. Keep your tax files secure. You need to be particularly careful with your computer security when dealing with your tax files. Make sure your PC’s anti-virus software is up to date and that the security patches on your operating system have been updated. Password-protect your computer, especially if you’re using a laptop or if people frequently come and go from your home, and encrypt sensitive files (especially your tax files).


4. Be careful with your Internet connection, too. Don’t work on your taxes on a public computer, which could have have been loaded with a spyware program that lets someone else see everything you do on the PC. And don’t send tax information through an insecure, wireless connection. “E-file your return from a secure home location, preferably through a wired rather than a wireless connection,” says Siciliano. “It’s amazing to me that people file their taxes from the public library,” he says. Also be careful if printing or copying in a public place.

5. Be careful when you dispose of tax files. When you get rid of physical tax files and supporting documents, make sure you shred the paper rather than throw it away. (See How Long to Keep Tax Records for more information about what to keep and toss). And when you eventually dispose of your computer -- whether you trash it, sell it or give it away -- make sure that your tax files (and other personal files) are gone. Siciliano recommends you use a program that wipes the information off the hard drive, then reinstall the operating system with the original disks that came with the computer.

Got a question? Ask Kim at askkim@kiplinger.com.