• Tax Advice

Tax Scam; Unraveling The Tactics of Fraudsters

Tax season is an annual ritual of navigating through receipts, forms, and deductions. It often brings the stress of filing returns. But this is not the only pressure. There is also a lurking threat of tax scam.

Fraudsters are increasingly devising sophisticated tactics to trick the citizens. Tax scams come in various shapes. You might get phishing emails claiming to be from the Australian Taxation Office (ATO). Or it could be a phone call demanding immediate payment. Such scams prey on individuals’ fears and vulnerabilities. Especially, older people and low-income earners are frequently targeted by scams.

In recent years, the rise of digital currencies has added a new layer of complexity. In this article, we will delve into the murky world of tax scams. I’ll shed light on the deceptive tactics of the scammers. I will also offer insights that will help you protect yourself against such fraud.

Understating Tax Scam

Tax scams encompass a wide range of fraudulent activities. Such activities are designed to deceive individuals or businesses. This includes asking them to provide personal or financial information, making unauthorized payments, or engaging in other activities that financially benefit the scammer.

Let’s have a look at some of the common types of scams.

1. Phishing scams

Phishing scams involve fraudulent emails and websites created to steal personal information. They ask you to enter sensitive information like bank account details. Scammers then use this information to file tax returns in your name. 

2. Fake refund scams

Scammers contact individuals, promising large amounts of tax refunds. Victims are asked to provide personal and financial information. They ask for this information to facilitate the refund process. But in reality, no refund exists. They use this information for theft.

3. Threat scams

Threat scams follow intimidating tactics. These include aggressive phone calls or official letters. They demand immediate payment of pending tax. Otherwise, they threaten legal action for alleged tax debts or non-compliance.

4. TFN and ABN scams

Individuals are offered to provide Tax File Number (TFN) and Australian Business Number (ABN) for a fee. But they don’t get a service in return. Such services are advertised through social media sites. These services are generally free. Scammers tell you that there is an issue in your tax file. They claim to rectify the issue. For this purpose, they ask you to pay some fee. Then, they use this money for fraudulent activities.   

5. Impersonation scams

Individuals receive phone calls from scammers. They pose as representatives of ATO or other financial institutions. They claim that recipients owe unpaid taxes. Moreover, they are also accused of some fraudulent activity. Victims are threatened with legal action if they don’t make the immediate payment.

How Can You Identify a Tax Scam

Recognizing the scams is the most important step to safeguard your personal information. You can do this by understanding what ATO never does. Following are a few red flags to watch out for.

ATO never ask you to:

  • Reply with your information in a text message, email, or social media post.
  • Log in to your online services from the link sent.
  • Pay via bank transfer to a bank that is not the Reserve Bank of Australia.
  • Pay by cash, cryptocurrency, gift vouchers, or card-less cash transfers.
  • Urgently pay money threatening arrest in a pre-recorded message.  

Tips To Protect Yourself from Tax Scam

As tax season approaches, ensuring your security is paramount. The prevalence of tax scams has increased significantly. Moreover, online accessibility to personal information has made it even easier for the scammers. Therefore, taking proactive measures to protect yourself has now become more crucial than ever before.

Here are some practical tips that will help you protect yourself against a tax scam.

1. Verify Legitimacy

Be cautious when receiving phone calls, emails, or text messages regarding tax matters. Scammers often request personal information such as TFNs, bank account details etc. They claim to resolve tax-related issues or ask for identity verification. Verify the legitimacy of any request by contacting government agencies directly using trusted contact details.

2. Protect Your Online Accounts

Use strong passwords for your online accounts. Especially protect those related to financial transactions. Avoid clicking on links in emails from unknown resources. Enable two-factor authentication to add an extra layer of security.

3. Stay Informed About Prevalent Scams

Stay informed about prevalent tax scams. Regularly check updates from government agencies like ATO or ASIC. Familiarize yourself with the latest scam alerts and warnings issued by these authorities.

4. File Your Return Asap

If you are entitled to a tax refund, file it as early as possible. This would highly reduce the risk of scammers intercepting your refund. Moreover, scammers cannot file a fraudulent refund in your name to claim a refund.

5. Remove Your Personal Information from Data Broker Sites

Data broker sites collect personal information, making it easily accessible to individuals, businesses, and potential scammers. Research and identify data broker sites that may have your personal information. Remove your personal information from these sites. To ensure security, regularly monitor that your information does not appear on such sites.

Suggested Read: Understanding Tax Return in Australia: In Depth Overview

Report Suspected Tax Scam

Reporting a suspected tax scam is crucial in combating fraud. If you witness any suspicious activity, immediately report it to the Australian Taxation Office (ATO). Following are a few ways to report the scam to ATO.

·         Call 1800 008 540.

·         Email to reportscams@ato.gov.au

Bottomline

As tax scams continue to evolve in complexity, staying vigilant is important. Now that you are aware of the tactics employed by the fraudsters. You can now mitigate the risks of tax scams and safeguard your financial well-being.

  • Jaxon Rylah

    Jaxon Rylah, an Australian of diverse heritage, brings a wealth of expertise to his role as an Author at Taxly.ai. With over 5 years of experience in the field, Jaxon's deep understanding of accounting principles and regulations allows him to provide...

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