Disclaimer: Please note this article is not financial advice. The purpose of our blog is purely educational, so please consult a professional accountant or financial advisor before making any financial decision.
Income tax preparation is a process that many business owners dread. However, it doesn't have to be so challenging if you hire the right service providers.
Income tax preparation services can provide practical ways for you to save money on taxes you owe in the coming year. But you have to be careful: some income tax preparation programs might leave you vulnerable to scammers or fraudsters who want access to your personal information.
This post will discuss some of the common scams and frauds that can happen when preparing to file your taxes. This way, you can better prepare yourself against them.
If you are looking for ways to protect your assets against scams and fraud, this article is for you.
The most vulnerable people to scams and fraud are the elderly and non-English speakers.
Older people who are not tech-savvy are easy targets for scammers. Unfortunately, they are not well-informed about the latest modus of scammers. Most of the time, scammers use the identity of someone related to elderly people to lure them into the trap.
Non-English speakers are also easy targets because of their poor understanding of the English language. Some scammers are multilingual and can assume the identity of anyone they like. Thus, they can mislead people with poor English skills and take their money without breaking a sweat.
Malicious attackers out there will try their best to steal from business owners like you. Becoming a victim of their scams is never easy, and it is depressing. That’s why the Canada Revenue Agency (CRA) and the IRS of the United States work hand in hand to protect taxpayers from scams and other fraudulent activities.
These scams and fraud often begin with a phone call or an email you receive right into your inbox. But what are the other types of scams and fraud you might encounter?
Take a look at our list and learn about the different modus operandi out there.
Fake emails, web forms, social media posts, and text messages are the most common types of phishing scams. Scammers send these messages to the victim to steal their valuable information. Thus, you have to be careful when receiving legitimate-looking messages that require you to click web links.
Scammers also use phishing to target corporate tax filers, human resource workers, and payroll professionals. These emails typically offer huge amounts of tax refunds or threats. Avoid opening the links or attachments included in these suspicious messages.
You have to be careful with people who promise tax deductions through fake charities. It is good to visit CRA or IRS portals to check the legitimacy of the charity a scammer is introducing to you.
Also, never disclose personal or financial details such as passwords, credit card information, or social security/insurance numbers to people asking for donations. Another thing you need to keep in mind is to not give a cash donation if you want to declare it as a tax deduction.
Receiving fake phone calls from scammers is one of the most popular ways to steal from people.
Scammers will pretend to be representatives of CRA or IRS, and often their calls are unexpected and quite aggressive. Technology upgraded this modus by allowing scammers to use robocalls and automated messages.
This scam is terrifying because the caller might already have personal information like your name, address, and the last four digits of your social security/insurance number. Additionally, scammers may use bullying to threaten and persuade their victims to pay taxes via gift card, prepaid debit card, or wire transfer.
Remember that CRA and IRS seldom call to request any specific payment, and they do not resort to bullying or any threatening remarks. If the scammer threatens you that your social security number will be suspended, remember that’s not possible.
With this tactic, scammers create a fake identity related to their victims to convince them to provide their personal data such as their full name, birthdate, address, and social security or insurance number.
Scammers can also utilize social media to get their victims' email addresses and send them malware links that can get through mortgage accounts, bank accounts, and other identifiable personal information.
Set strong passwords and install antivirus software when accessing or storing sensitive financial data online. You should also store your tax records and important cards in a safe place.
Remember that scammers can steal your data with various security breaches. They will then use stolen taxpayer identification details to file and claim fake tax returns.
If you’re considering hiring income tax preparation services, you have to be very careful and conduct thorough research on the firm you will hire. Scammers can pretend to be tax preparers to steal your identity and use it in other tax scams.
To ensure that you are with a legit firm or professional, validate their credentials by visiting the CRA or IRS website. You can also hire qualified tax preparers on their websites if you want to conserve time.
Knowing the ins and outs of tax preparation is essential. You can attend income tax preparation programs or ask your tax preparer to give you a walkthrough of your income tax.
Scammers often claim to prepare your taxes and ensure you a large tax refund. They also file a fake return under your name and have the tax refund deposited into their account. Always remember that legit tax preparers will provide a copy of the filed tax return.
One of the most common scams is persuading the taxpayer to file a fake return using fake tax forms to lower the sum of taxes due. False tax deductions may increase or decrease the amount of income claimed to get the maximum tax credits possible.
Scammers may also convince their victims to overstate deductions by falsifying their child tax credit, donations, business expenses, and medical expenses. You wouldn't want the CRA or IRS to penalize or sue you, so you have to be honest with your tax deductions.
Your earnings are the product of your hard work. To protect yourself, here are our tips.
Here at Unloop, our expert bookkeepers work with trusted tax partners. You deserve a hassle-free experience, so let us do the work for you! After we prepare your financial statements, you can rest easy knowing our partners will handle them with care.
Should you have further questions about our services, call us at 877-421-7270. We’d love to hear from you!
Unloop is the first and only accounting firm exclusively servicing ecommerce and inventory businesses in the US and Canada. With the power of people and technology, our team dives deep into COGS and inventory accounting. You are paired with a dedicated bookkeeping team that prepares accurate financial statements, financial forecasts, and can also pay bills or run payroll for you. Come tax time, everything is organized and ready to go, so you don't need to worry. Book a call with an ecommerce accountant today to learn more.