Tax Fraud

Look Out for Tax Fraud Schemes

December 18, 2023
by Team SESLOC

Get a head start on tax season this year by protecting yourself and your loved ones from these financially disastrous scams:

In Relation to Your Unclaimed (and Unexpected!) Refund

A recently posted IRS consumer alert warns that a mailing some individuals have received misleads people into believing they are owed a refund. The letter looks official but includes contact information that isn’t directed to real IRS customer service agents. The letter requests identifying information (like a driver’s license photo, financial account and routing numbers, and Social Security number) to prove the recipient of the “refund” is who they claim to be. If provided, this will give the scammer the information they need to steal your identity. Watch out for solicitations like this one and remember to only contact the IRS using legitimate methods from their official website,

Fuel Tax Credit Scam

The IRS has seen an increase in promotions for filing for the fuel tax credit, described in this IRS consumer alert. This is a credit for federal tax paid on fuel and it is intended for off-highway businesses and farming use. It isn’t available to most taxpayers. However, unscrupulous tax return preparers and others convince individuals to increase their refunds by claiming the credit illegitimately. Scammers often promote the tax credit and charge a fee to file it, pocketing both the fee and the refund. When the erroneous filing is discovered, you will be on the hook for paying the money back to the IRS. 

Tax Avoidance Schemes

While it sounds wonderful, a claim that your owed taxes can be dramatically reduced or eliminated is certainly too good to be true. These scams often target high-income individuals in the highest tax bracket. Known as abusive tax avoidance schemes, these scams can include predatory deals with investment insurance, conservation easements, or hiding assets internationally. Taxpayers should beware of any scheme that promotes a dramatic reduction in taxes owed. 

Year after year, tax preparer fraud and identity theft remain near the top of the IRS Dirty Dozen list of the worst tax scams and thus deserve another look. The scams mentioned above are often tied to these fraudulent activities, as they are promoted by fraudulent tax preparers who are ultimately out to steal or sell your identity. 

Tax Preparer Fraud

Tax preparers who operate in a gray zone or are out to only commit fraud against unsuspecting victims are unfortunately all too common, and these fraudsters refine their techniques to become more convincing each year. Illegitimate tax preparers will often be set up in a temporary location leading up to tax season and will be gone before you realize you’ve become a victim. They’ll offer extra deductions and credits you aren’t actually eligible for, drawing you in on the promise of a hefty refund. They will then direct that refund to their bank account, and you’ll be the one investigated for filing a fraudulent tax return. 

Watch out for these five red flags that your tax preparer may be a fraud.

  1. The preparer does not provide their preparer tax identification number on your return.
    To learn more about different types of tax preparers and to find a qualified preparer in your area consult this Directory of Federal Tax Return Preparers with Credentials and Select Qualifications.
  2.  You are not asked to document your deductions, or you are encouraged to cheat.
    Tax preparers that you can count on will not only help you file your return today, but also make sure that you have the appropriate documentation to back up your return should you need to analyze it later.
  3. You are asked to sign a blank or partially filled-out return, with the promise that the preparer will “fill it in later.”
    A reputable tax preparer will insist that you review your completed return before you sign it and provide you with a copy of your signed return.
  4. The tax preparer’s fee is based on a percentage of your refund.
    These individuals are incented to convince you to claim false deductions or make other untrue statements to inflate your refund amount.
  5. Your preparer suggests that your refund be directed to an account that you can’t control.
    Unless you get an immediate advance on your refund, secured by your tax refund, then it could be a scam.

And remember, if a tax preparer is willing to lie to get your business, they could be likely to steal your identity using the information you’ve provided for them to file your taxes. If you have further questions or feel that you’ve fallen victim to this scam, you can get assistance from the Taxpayer Advocate Service, an independent organization within the IRS. 

Tax Identity Theft

Tax-related identity theft occurs when a criminal uses your personal information to file a tax return in your name to claim your federal tax refund. Taxpayers might not know they’re the victim of tax identity theft until they try to file a return online and learn that one has already been filed using their information. One way to prevent tax identity theft is to request an Identity Protection PIN from the IRS. This is a six-digit number only known by you and the IRS, and it prevents someone else from filing a return in your name. Get your IRS Identity Protection Pin now. 

If you feel you’ve fallen victim to tax fraud, our Identity Theft Recovery Advocates are here to help! If you have a HomeFREE Checking™ account, SESLOC is standing by to help you identify proper resources at the IRS and walk you through this process. We will work for you and with you to help you recover from identity theft and minimize the losses and damage it causes. Feel free to reach out to us today or visit our website to learn more about identity theft remediation and other services included in your SESLOC HomeFREE Checking™ account


Prepared by NXG|Strategies, Copyright 2023.