Tax Scams: 4 Questions to Ask Before You File This Season

Tax season is here, and with it comes a surge of advice – some of it sound, some of it…less so. It’s easy to fall for a “tax hack” promising sizeable savings, especially when shared widely on social media. But before you try to write off that SUV or claim your pet Chihuahua as a security expense, it’s crucial to pause, and evaluate. Following faulty tax advice can lead to penalties, interest, and even legal trouble, according to certified public accountant Mark Gallegos. This year, take a moment to vet any tax strategies you’re considering. Here are four questions to ask yourself, adapted from NPR’s Life Kit, to help you navigate the complexities of tax season.

Does it Sound Too Solid to Be True?

A common red flag is a claim that everyone qualifies for a particular tax break. Tax law is incredibly specific, Gallegos explains. Credits and deductions come with eligibility tests, income limits, documentation requirements, and even industry-specific criteria. A “one-size-fits-all” tax hack is almost certainly too good to be true. Even if you initially appear to meet the criteria, it’s always best to consult a primary source – IRS.gov – or a qualified tax professional before taking any action. The IRS website offers detailed information on various tax credits and deductions, including eligibility requirements and how to claim them.

Is the Source Qualified to Supply Tax Advice?

Not everyone offering tax tips is a qualified expert. Genuine tax advice comes from certified public accountants (CPAs), tax attorneys, and enrolled agents. These professionals have undergone specific training and are held to professional standards. While certified financial planners (CFPs) can advise on the tax implications of financial decisions, they aren’t necessarily experts on the intricacies of the tax code itself. If the source of the advice isn’t one of these qualified professionals, and they aren’t backing up their claims with references to official IRS publications or tax law, proceed with caution. You can verify a CPA’s credentials through the American Institute of Certified Public Accountants (AICPA).

Are You Playing “IRS Roulette”?

Some tax strategies rely on the hope that the IRS won’t notice a discrepancy. Gallegos calls this “IRS roulette” – a dangerous gamble. The assumption that the IRS might simply overlook something is a clear sign that the advice is questionable. The IRS has sophisticated systems for detecting errors and fraud, and audits are a real possibility. Don’t rely on luck; ensure any tax strategy you employ is fully compliant with the law. The IRS provides resources on audit procedures and your rights as a taxpayer on their website.

Is There a Sense of Urgency?

Tax scams often create a sense of urgency to pressure you into acting quickly without thinking. This might involve threats of legal action, demands for immediate payment, or claims that a deadline is rapidly approaching. The IRS will never demand immediate payment over the phone or threaten you with arrest. Be wary of any communication that creates a sense of panic or requires you to act without careful consideration. The Better Business Bureau (BBB) has reported a rise in tax imposter scams, so it’s crucial to be vigilant. You can find information on how to identify and report tax scams on the BBB website. The IRS also provides guidance on how to recognize scams and protect your information.

This tax season, remember that a little skepticism and due diligence can go a long way. Don’t be afraid to seek professional advice, and always verify information from reliable sources. Taking the time to ensure your tax return is accurate and compliant will save you headaches – and potentially significant costs – down the road.

This story was edited by Meghan Keane. We’d love to hear from you. Leave us a voicemail at 202-216-9823, or email us at [email protected].

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