Mellody is president of Ariel investments, a Chicago-based money management firm that serves individual investors and retirement plans through its no-load mutual funds and separate accounts. Additionally, she is a regular financial contributor and analyst for CBS news.
Tom: It’s that time of year again, and we are talking about taxes!
Mellody: We certainly are, Tom. While it may seem like you have plenty of time left, there are only 8 more weeks until the April tax filing deadline. Employers are sending out W2 forms, if they haven’t already. The airwaves are full of commercials for tax preparation services. And scammers are gearing up to try and take advantage of you. We have seen a big story erupt around fraudulent filings with TurboTax most recently. All signs that tax season is upon us, Tom.
Tom: Let’s start with TurboTax. What is the issue there?
Mellody: The big news here is that fraudsters have used the company’s software to file false returns. It started with filers learning that someone had already filed a state tax return with their information, and now the FBI is investigating whether or not federal returns have been filed. While intuit, the company that owns the TurboTax program, has said the information was not accessed via their computer system, it exposes a big opening in the electronic or e-file tax systems.
And it means that many people who have yet to file – most Americans, in all honesty – have yet to find out if someone has already fraudulently filed for their tax return already. That means that for some people, they have a long slog of working with the IRS ahead to straighten out any fraudulent activity, while the rest of us are faced with the prospect of filing delays as the IRS and FBI get to the bottom of this.
Tom: What are the goals of these tax scammers, Mellody?
Mellody: The bad guys have two big goals: to get ahold of some of your money directly, just like these criminals filing fraudulent returns on TurboTax, or to steal your identity and reap financial rewards in that way.
First, let’s start with ways the bad guys target your money directly during tax season. The big one is return preparer fraud. While, most tax professionals are honest and above board, you need to be cognizant that there are some out there who do commit refund fraud. These scammers may also promise big refunds, beyond the usual amount that you get.
Anyone who asks you to sign a blank tax return or promises a large refund without first examining your financial records definitely falls into this category. The second big con that emerges every year around tax time is fake charities. The bad guys falsely pose as charitable organizations seeking donations that they say are tax deductible when they aren’t, and simply walk away with your check.
Tom: What about the indirect route to our wallets?
Mellody: The big scam here is identity theft. The effects and losses caused by personal identity theft in this country are huge. Nearly 20 million people experienced at least one identity theft incident last year in total, many of them during tax season.
Money Mondays: Protecting Yourself During Tax Season was originally published on blackamericaweb.com