Tax Return Scams

During tax season taxpayers have an invisible target on their back.  Criminals are constantly seeking ways to hit this moving target by implementing various scams.  The goal of this post is to provide tax payers with actionable knowledge to avoid tax scams and not be an easy target.  The four top scams reported by the IRS on their “Dirty Dozen” list are outlined here for you.  Along with informing you of the top four scams, we have provided ways for you to avoid them this tax season.  Continue reading to learn how you can protect your return this year.

IRS Impostor Scams

Phishing Emails

Email has become a low cost and effective medium to distribute official looking notifications to individuals.  Cybercriminals are going to painstaking lengths to ensure the email looks official.  A phishing email may appear as a legitimate message, requesting you to confirm personal information for some stated reason.  Or maybe the message is requesting immediate action on your part with threats of legal action if ignored.  The IRS has identified email phishing schemes as a top tax filing season scam on its annual list of “Dirty Dozen” tax scams for 2018.  Given the wide spread use of email this trend is most likely to continue in 2019 tax filing period.  A recent tactic for tax scams uses the victims’ own bank account.  Cybercriminals use compromised personal data stolen from a tax professional or a taxpayer’s personal computer to file fraudulent tax returns.  Then cybercriminals use a taxpayers’ real bank account to direct deposit the tax refund.  After the refund has been deposited, the cybercriminals use various methods- such as phishing emails, phone calls, and websites, to reclaim the deposited refund.

Remember, the cybercriminal’s goal with an IRS phishing email is to steal your personal information or install malware on your computer for theft of data.  When an email makes a request you wouldn’t normally expect, it’s often a strong indicator that it’s not from a trusted source.  When in doubt do not click any links in an email.  Contact the IRS directly concerning your tax situation.

Fake IRS Phone Calls

During the period for tax filings, chances are high you will receive an unsolicited phone call from an individual claiming to be an IRS official.  The call purpose is to pressure taxpayers into sending money by wire transfer, prepaid debt card or gift card to settle a tax bill.  The caller may threaten you with arrest, suspension of driver license, tax lien, or asset seizure.  The scammer is counting on you being scared into compliance and not resisting or questioning the call.  Your response should be to hang up the phone immediately.  Do not provide them any information.  Here are five signs you have received a fraudulent phone call.

The IRS will not:

  1. Call to demand immediate payment, nor will they call about taxes owed without first having mailed you a bill.
  2. Demand that you pay taxes without giving you the opportunity to question or appeal the amount they say you owe.
  3. Require you to use specific payment method for your taxes, such as a prepaid debit card, Google Play gift card, iTunes gift card, Western Union, MoneyGram, bank wire transfers, or bank deposits be made into another person’s account for any debt to the IRS or Treasury.
  4. Ask for credit or debit card numbers over the phone.
  5. Threaten to bring in local police or other law enforcement groups to have you arrested for not paying.

Report the call to the Treasury Inspector General for Tax Administration, using their IRS Impersonation Scam Reporting website or call 800-366-4484.

Fake tax preparation services

Unscrupulous tax preparers looking to defraud and make a quick profit off taxpayers that need assistance with filing refunds is an ongoing issue.  Criminals are opportunistic and constantly looking to capitalize on legitimate business behavior.  Pop-up tax preparation services promising high refunds for a fee is one such opportunity criminals use to target taxpayers.  Scam preparers use this offer of high returns to lure taxpayers through the door.  They may file for credits or deductions that the taxpayer is not entitled to claim.  After a short period of time the preparation service vanishes leaving the taxpayer to explain to the IRS the misleading information.

Taxpayers should confirm that a tax preparer agency is legitimate before utilizing that service to prepare their taxes.  Check with the Better Business Bureau about a tax preparer to ensure they don’t have negative actions or license suspensions.  For Certified Public Accountants, check with the Alabama State Board of Public Accountancy.   Selecting an honest preparation service is important because ultimately the taxpayer is responsible for what they submit on their tax return.  Here are some tips to help taxpayers identify and avoid fraudulent tax preparers:

  • Ensure the preparer will be available in the event questions come up concerning the return after it has been filed.
  • Ask if the preparer has an IRS Preparer Tax Identification Number (PTIN). Paid tax return preparers are required to register with the IRS, have a PTIN and include it on tax returns.
  • Ask to see proof that a tax return preparer has a professional credential (enrolled agent, certified public accountant or attorney), belongs to a professional organization or attends continuing education classes. A knowledgeable tax preparer should stay informed of tax matters.  The IRS website has information regarding national tax professional organizations.
  • Check the preparer’s qualifications using the IRS Directory of Federal Tax Return Preparers with Credentials and Select Qualifications.
  • Make sure the preparer offers IRS e-file for tax returns. It is an accurate and safe way to file your tax return.
  • Avoid preparers who base fees charged on a percentage of your refund.
  • Never sign a blank return form. If a tax preparer asks you to sign an incomplete or blank tax form leave immediately and report them to the IRS.  Use Form 14157, Complaint: Tax Return Preparer

Visit this IRS website (Choosing a Tax Professional) to learn more about choosing a tax preparer.

Identity Theft

According to the IRS, taxpayers reporting identity theft has fallen “nearly 65 percent between 2015 and 2017.”  Even with this decrease in reported cases of identity theft, taxpayers need to remain vigilant during tax filing season.  Your personal information may have been compromised in a number of ways by cybercriminals without you realizing until it is too late.  Email phishing is a main point of entrance cybercriminals use to initiate an identity theft attack.  Data breaches occurring at large companies are another way attackers gain access to personal financial information.  This information can be use by cybercriminals to impersonate a taxpayer and file a tax return.  The good news is steps can be taken by individuals and tax preparers to secure sensitive information.

A few steps that can be taken include:

  • Utilize security software with anti-virus and firewall protection to secure computer systems.
  • Configure security software to check for and install updates automatically.
  • Encrypt sensitive files such as tax returns, bank statements, and credit reports stored on computers.
  • Stay informed of cybersecurity threats and attacks being used by cybercriminals.

To get more information on identity theft from the IRS website Identity Protection: Prevention, Detection and Victim Assistance.

Understanding and using the information provided in this post will greatly assist in protecting yourself during tax season.  Stay up to date on the latest scams targeting taxpayers at the IRS website IRS Tax Scams/Consumer Alerts.  Bookmark Alabama Cybersecurity website to stay informed on the latest issues and useful tips to stay safe online.