Five top financial scams: Don't be victimized

By Jaye Ryan

The winter holidays are perennially targeted time frames for last-minute tax scams. The IRS annually issues a top scam list, and 2012 was no exception. Avoid the late problems that can lead to fines, penalties, interest and even potentially jail terms by being on the look-out for the top five tax scams both now and in the new year.

Scam #1: Identity theft

Identity theft can stem from many sources and methods, but in November, December and January, the most common tool is email: Don't believe any email allegedly from any source that requests your personal information for gifts, inheritances, tax fund shifts or 'verification' for any reason. No legitimate business will ask for this via email. No government agency, here  or abroad, will send you a bona fide request for personal information via email.

Many scammers program email addresses to reflect a government agency, a law firm or a bank. Do not believe it, whether the request is in the body of a text or a “form” as an attachment.

Do not click on unknown links included in emails. Even if the address of the sender is known, scammers highjack contact emails and send you fake information to get you to click something supposedly by friends.

Scam #2: Phishing

 

Most often pertaining to viruses and fake websites, no bank or legitimate online entity will request you sign into an online payment site or your online bank account to 'verify' anything. Avoid links included in these emails, for your account user names and passwords can be stolen in addition to your personal information, as noted above. The Internal Revenue Service will never ask for personal information by email.

Scam #3: Tax preparer fraud

 

Watch for offers to reduce your taxes for a fee. Run from those that offer to hide income or that promise you a return of $0 income. Both types are probably fraudulent and want to either steal your identity or defraud you of your money.

If you do use a tax preparation service, obtain and verify the Preparer Tax Identification Number. The IRS can verify it telephonically: Don't take the word of the new preparer.

Scam #4: Offshore income blinds

Do not fall for the offer to hide your income offshore, whether for a fee or a percentage of assets. Not only will the IRS track transfers but you could also land in jail for this illegal attempt to dodge taxes.

Scam #5: Promises of free money

On the rise in 2012 are email claims that either the IRS or Social Security has money waiting for you to claim. They don't. Instead, this is often a money-laundering scheme, just as the blind inheritance from overseas scam is.

Along this line, fee-based 'help' with Social Security claims is also escalating. While there are legitimate firms that can help, scammers aren't registered with the state. For a fee, paid first, you get 'assistance' with completing forms and gaining benefits. Unfortunately, the only true part of this scam is that you pay money. The claims, if file, are never successful, whether initial or an appeal.

Additional scams are listed on the IRS website. Don't be a victim to any of them. Protect your finances.

Written by Jaye Ryan, a freelance author who loves writing about avoiding financial scams.

* All images: US-PDGov