There are few feelings worse than realizing you've been had -- especially if you've been taken to the cleaners in the process. It happens to many people, though, because there are gobs of financial scams out there, and plenty of scammers looking for people to take advantage of.
Here's a look at three common scams.
A common kind of tax scam these days occurs when a con artist files a tax return for you -- and claims your refund. He or she will have to have gotten some critical information from you first, such as your full name, address, and Social Security number. All kinds of financial mayhem can ensue if you don't guard such information and are not judicious in giving it out.
How does a scammer get that information from you? Well, they may just call you and pretend to be with an organization you trust, such as the IRS, the Social Security Administration (SSA), your bank, or your credit card company. They may explain that there's some problem and to fix it, they will need to verify your information. This is called "phishing," as in fishing for information. Similarly, they may email you, pretending to be a trusted organization, and get you to click a link in order to solve a worrisome problem -- perhaps, for example, they will pretend to be a bank and will suggest that a $900 withdrawal (that you didn't make) will go through unless you click a link and tell them not to process it. You might then be asked for personal information. Or perhaps the link will cause some malware to run on your computer.
Making matters worse, many scammers employ "spoofing" tricks. They can call you and have their phone number display as coming from the IRS or the Social Security Administration or a business or agency you trust. They can also make their fake emails look a lot like those from known organizations, complete with the companies' logos and official-sounding language. Try to be skeptical whenever any entity reaches out to you and wants your personal information -- especially if they're trying to alarm you.
Back to that tax scam: How might you prevent it, beyond safeguarding your personal information? The best way is not to procrastinate about preparing and filing your return. If you get your taxes done and sent in early, you'll give the scammers much less time in which to try to steal from you. Also, know that the IRS doesn't call taxpayers asking for immediate payments to solve problems, and it doesn't email you about your refund or ask for your personal information via email, either.
A last tax scam to look out for is that of the "ghost" tax preparer. That's when you pay someone to prepare your return, but he or she doesn't sign it and instead has you sign it. That makes it seem as if you prepared it, and you will be on the hook if the unscrupulous preparer changed some of your numbers, perhaps to qualify you for some tax breaks. Some ghost preparers will also quietly divert refunds to their own accounts. If you're paying someone to prepare your return, don't just go with a stranger at a booth somewhere. Ask around for recommendations or go to a reputable company.
Social Security scams
Similarly, scammers use many of the techniques above to try to get at your Social Security benefits. They may call or email you to alarm you, saying that your Social Security number has been canceled or suspended, for example. Once they have the information they need, they can set up an account in your name with the SSA and use their address and bank account in order to collect your benefits.
One way to prevent this is to set up a my Social Security account with the SSA before a scammer does. You don't have to be in or near retirement to do so -- you can do it at any age. Upon doing so, you'll be able to see the SSA's record of your earnings for all of your working years, along with estimates of the benefits you'll collect if you start collecting at different ages.
Remember that like the IRS, the SSA doesn't call you to get personal information. If you're not sure whether a certain call is legitimate, try hanging up, looking up its number online, and calling the agency yourself. (You'll find the Social Security Administration at 800-772-1213 and the IRS at 800-829-1040.) Then you can ask about the status of your account or if there are any problems. (There probably aren't.)
Now that you know what to look out for, you can probably defend yourself well against Medicare scams. In many of those, scammers will call or email you with alarming news -- such as that your Medicare will be canceled unless you quickly provide some personal information to the caller, such as your Medicare number. Understand that Medicare doesn't call people -- and it doesn't need to be told your Medicare number, as it already knows it.
Don't let any callers or emails tempt you into changing your healthcare coverage, either, as they can be touting either a phony nonexistent plan or a plan that offers much less coverage than it may seem to. It is good to shop around for the best Medicare plan for yourself, but do your own digging and shopping -- don't respond to strangers contacting you.
The more you learn about scams and scamming techniques, the less likely you'll be to fall for them. As you go through your financial life, saving, investing, paying taxes, collecting benefits, getting healthcare, and so on, be alert for those who want to take advantage of your hard work.