Tax scams are more and more concerning, especially since the popularization of the internet. Cybercrime is on the rise, and learning to protect yourself against it is more important than ever. Unfortunately, the number of high-cost frauds increased by 60% in 2023.
In this article, you’ll find practical advice to avoid falling for online scams, and you’ll get to understand how different cyberscams operate.
Tax Fraud 101: Top 3 Tax Scams to Watch Out for
Tax scams aren’t all the same, and you’ll likely find different kinds in your life. These are the 3 most common ones.
1. Phishing Scams
This kind of scam involves fake emails and websites that imitate those of legitimate tax agencies, such as HMRC (Her Majesty’s Revenue and Customs).
Often, these emails prompt you to click on a website and input your personal information. From here, the scammers commit identity theft. Research shows that 33% of consumers in the UK fell prey to identity fraud in 2023 (losing £311.09 on average), compared with the 23% who experienced identity fraud in 2022. Fortunately, the levels are lower than the pandemic, but still alarmingly high.
2. Phone Scams
Anyone with a phone has experienced a phone scam at least once before. They’re also known as vishing or voice phishing. Someone might call you and claim that you owe taxes, threatening you to take legal action if you don’t pay immediately. These scammers often use official-sounding language, and they might even fake their caller ID to make it seem real. Don’t trust them!
3. Tax Preparer Fraud
When it’s time to prepare your taxes, many scammers take it as an opportunity to steal from people. They might pose as tax preparers, something that the HMRC has already warned people about. They’ve received more than 130,000 reports about tax scams in the 12 months to September 2023, of which 58,000 were offering fake tax rebates.
Recognizing Tax Scams
When you learn to spot a scam, you can effectively avoid it. Here are some red flags to keep an eye out for:
- Protecting Yourself from Common Scams: Tax authorities and legitimate companies will never initiate contact with you through email or phone. They won’t ask for information through these means either, and they won’t ask you to pay with sketchy links.
- Legitimate Entities Will Never Ask for Information or Payments Over Email/Phone: Scammers will threaten you with everything, from legal action to the fake kidnapping of a family member, to scare you into giving them money. Do not believe them! Instead, contact the company through its official communications channel.
- Scammers Use Threats and Scare Tactics to Extort Money: When an authority asks for personal information via email or phone, again, don’t fall for it. They can ask for things that range from your bank account, credit card initials, and other sensitive information. Remember to never give out these details.
- Never Provide Personal or Financial Information to Unsolicited Callers/Emailers: Scammers will ask you to pay through gift cars or make you pay with a prepaid debit card. These are all clear indications of a scam.
Avoiding Tax Scams
If you want to protect yourself from these people, you need to stay vigilant and be proactive. You can follow these steps to reduce your risk of becoming a victim of online fraud:
1. Verify the communication
This ties up with what we’ve said before. Double-check any communication that supposedly comes from tax authorities. Contact the agency directly, go to the office, ask, and phone them via their official, website-posted phone number. Never use the email address that they contacted you with first.
2. Contact reputable tax preparers
Do not get just anyone to do your taxes; make sure that the people you’re working with are reputable and certified. Check their qualifications and find out if they have online reviews.
Never go to preparers who promise you to refund large amounts of money, and don’t believe them when they say they’ll charge you a percentage of your refund either. Make sure they’re safe and transparent in all their communications.
3. Read the news and stay informed
Stay updated about tax scams, learn the latest scam techniques, and visit official tax agency websites to learn more. Subscribe to their alerts and learn more about how to protect yourself with the modern cybersecurity software. Being aware of new scam tactics can help you recognise and avoid them.
To sum up
Tax scams are a serious but preventable threat. Knowledge and vigilance are your best friends. If you understand what you’re facing, you’ll quickly learn how to protect yourself.
Verify communications, protect your personal information, and stay alert. Remember, if you’re unsure, contact the agency via their official channels.
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