Tuesday, March 4, 2014

During Tax Season, Be Wary of Potential Scams

As the April 15 tax deadline approaches, I am warning Rhode Island consumers to be extra-vigilant about potential tax-related scams. Particularly in these difficult economic times, tax season can be very stressful – both mentally and financially – and con artists know that being under stress can make people more vulnerable.

My office is warning Rhode Islanders to be vigilant against predatory or even fraudulent tax-related offers. To help consumers avoid being scammed this tax season, we have put together a list of “red flags” to watch out for, and tips to help you – and your money – stay safe.

Red Flags
  • Never give any personal information to someone you don’t know who calls or emails you and offers to help with your taxes.
  • Be cautious of emails claiming to be from the Internal Revenue Service (IRS) seeking personal information allegedly for the purpose of processing refunds.  These types of emails are known as “phishing” attempts.  They look official and may include subject lines that read “Refund Notice” or similar misleading phrases but the IRS does not send emails asking for personal information to process refunds.
  • Be wary of tax return preparers who charge inflated fees.
  • Be cautious of tax preparers who try to sell you an extra guarantee.  These guarantees claim that the company will reimburse you if they make a mistake with your tax returns and your filing fee has to be amended.
  • Avoid tax preparers that ask you to sign a blank tax form.
  • Be cautious of advertisements that promise to help eliminate your debt with the IRS for “cents on the dollar.”  Many of these companies charge high fees and rarely get the results.
  • Be cautious of companies or individuals who contact you file your taxes and claim that they can check on the status of your tax refund for a fee.  Consumers can go directly to the IRS website to check status.  Simply go to http://www.IRS.gov and click “Where’s My Refund” to check the status of an anticipated refund.  

  • If you are using a website to file your taxes, make sure your information is protected by looking for the lock icon on the address bar.
  • Be careful with all documents that contain personal financial information or tax related information.  Scam artists know that mailboxes and trash bins often contain sensitive documents, especially during tax season.  Make sure to collect your mail regularly and store all tax related documents in a safe place.  Shred all documents that contain personal financial information before throwing them away.  
  • If you decide to use a certified public accountant (CPA), make sure that the CPA is licensed with the Rhode Island Department of Business Regulations.
  • If you decide to use a tax preparer, ask about service fees up front.
  • If you enter into an agreement with a tax preparation service, be sure to get a copy of the signed contract and other paperwork before you leave the business.
  • Think twice before you choose an “instant” or “rapid” refund.  These types of refunds are also known as Refund Anticipation Loans.  They can give consumers cash quickly but may have high fees and interest rates.
    • Understand that accepting the “instant” or “rapid” refund check means you are taking a loan against the refund you hope to get back from the IRS.
    • There is no guarantee that you will get a refund from the IRS and if you don’t, you will still have to pay the Refund Anticipation Loan back.
    • Typically, Refund Anticipation Loans have higher interest rates than conventional loans. You might also have to pay an extra filing fee.
  • If you are in a hurry to obtain your tax refund, file electronically with the IRS and sign up for direct deposit. You can visit the IRS website at http://www.IRS.gov
  • Many non-profit organizations have free tax preparation assistance available for those who qualify. The Volunteer Income Tax Assistance (VITA) program offers free tax preparation assistance to people who qualify; there are numerous VITA sites throughout Rhode Island at community agencies certified by the Internal Revenue Service. A list of VITA sites is available at http://www.economicprogressri.org/Portals/0/Uploads/Documents/Guide%20Documents/VITA%20Sites%201.31.14.pdf

About the Office of the Attorney General Consumer Protection Unit
The Office of the Attorney General Consumer Protection Unit investigates and mediates consumer complaints concerning unfair and unlawful business practices and misleading advertising arising out of alleged violations of the Deceptive Trade Practices Act. If groups of people are victimized by a deceptive trade practice, this office may file in the Superior Court a civil investigative demand, which is a formal investigation. In appropriate cases, a lawsuit to stop the illegal business practice may be initiated.

Apart from carrying out its statutory responsibilities, the Unit also provides information and referral services to the general public. Consumers are directed to the appropriate governmental or private agencies for help in answering specialized questions or resolving disputes that are not within the Unit's jurisdiction.

The Consumer Protection Unit is available to speak to community groups on how to prevent being a victim of identity theft and other scams. For more information, please visit www.riag.ri.gov or call (401) 274-4400.