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Consumer Scams

Tax Scams That Target Millions of Americans

Tax scams can be lucrative for con artists.  They can run their operations from any country in the world and steal our money. IRS scams have become so prevalent that both the IRS and the Federal Trade Commission (FTC) have issued warnings on their websites to alert U.S. taxpayers of the risks.  Since October of 2013, over 12,716 people in the U.S. have been bilked out of more than $63 Million Dollars by scammers.  That represents a lot of innocent people losing a great deal of money.  Why are these scams so successful?  The crooks have done their homework.  They pull out all the stops to create the illusion of legitimacy. They use websites that look authentic, letterhead copied from the IRS, and fake badges and ID numbers.  All we can do as taxpayers is to be aware of the potential risks and always be vigilant.

Telephone Scams

By now, many of us have received the fake IRS phone call.  The caller purports to be an IRS agent, often using a phony badge or ID number.  They may use a technology called “spoofing” to make their telephone number come up on caller ID as the IRS.  They inform you that you owe money to the IRS and threaten penalties or criminal charges if you don’t immediately pay.  The scammers may send you bogus IRS emails to support their claim of tax debt.  They may call a second time claiming to be either the police or the motor vehicle department with additional threats. The caller instructs you to send money either by wire transfer or by prepaid debit card. The key to defeating this scam is to know the IRS never, never contacts taxpayers by telephone and asks for money.

These scams have become so sophisticated that they may use video relay services to scam the hearing impaired. The IRS is warning taxpayers not to accept these calls just because they come through VRS.  Video Relay Interpreters do not screen calls for validity.  They simply interpret what is said.  Scammers also target taxpayers with poor English skills by employing callers who speak the taxpayer’s native language.  No matter how legitimate the caller sounds, keep these facts in mind:

  • The IRS will never call and demand payment by wire transfer, gift card, or prepaid debit card.
  • If the IRS believes you owe on your taxes, it will send you a notification letter.
  • The IRS will never threaten to bring in law enforcement to arrest you if you do not pay immediately.
  • The IRS will never demand payment without giving you the right to appeal.
  • The IRS will never ask you for credit card or debit card information over the phone.

Be Wary of Phishing Scams.

Phishing is when criminals try to steal your financial information through fake emails or websites.  Phishing scams are becoming more sophisticated every day.  They may use a bogus website that looks amazing like the actual IRS site.  Their emails may closely simulate IRS logos.  The scammers are looking to steal your financial data and your identity.  The emails may ask for credit card or bank account information.  They frequently require you to enter your social security number.  Please remember that the IRS does not initiate contact with people by email.  The agency always uses the U.S. Postal Service. The IRS will never ask you for life insurance information or information about annuities. If you receive a suspicious email that appears to be from the IRS, you can report it by forwarding the email to This email address is being protected from spambots. You need JavaScript enabled to view it..

You also need to be wary of emails that seem to come from a tax preparer requesting financial information.  Some victims have received emails that purport to be from the Taxpayer Advocacy Panel about an unclaimed tax refund.  The goal is to trick people into supplying personal or financial information to this official sounding panel.  Do not answer the email or click on any link that is provided.  The Tax Advocacy Panel is a volunteer board that serves to advise the IRS on major issues.  It will never contact a taxpayer by email and ask for financial or personal information.

Another phishing scam has arisen that targets Hotmail users. As of December 13, 2017, the IRS had received more than 900 reports from Hotmail users who were targeted.  In addition to schemes targeting taxpayers, there are phishing scams targeting tax preparers.  Those scams aim to acquire customer information and financial data.

The Phishing Scam Aimed at Employers.

This past year a new phishing scam has emerged that targets employers rather than individuals.  This is a twist on tax return identity theft which will be discussed later.  This phishing scam has successfully conned major companies into turning over copies of employee W2 forms.  Usually, the scammer pretends to be a high-ranking company official asking either payroll or human resources for W2 data.  The crooks then use the information to file bogus tax returns or they sell the information online.  The company is the target, but the employee suffers the loss.  The IRS is urging employers to have protocols in place to keep employees’ personal data secure.  This W2 scam is just one of several new ploys for large-scale identity theft that targets employers, payroll companies, and tax preparation services

The Snail Mail Scam May be the Toughest to Identify.

For years, tax authorities have advised people that the IRS does not contact taxpayers by email or telephone, only by letters mailed through the U.S. Postal Service.  Now, letter scams are appearing.  The letters appear to be on legitimate IRS letterhead.  Some of these bogus letters for the 2017 tax year are using the Affordable Care Act.  The letter tells the taxpayer he has violated the Affordable Care Act by failing to purchase health insurance.  Other criminals are sending fake IRS letters with counterfeit versions of CP2000 notices.  (CP2000 notices are letters informing taxpayers of discrepancies in their returns).  These fake letters look real and will probably fool a lot of people.  Here are a few tips to help spot the fakes:

  • The letter seems to be issued from an address in Austin, Texas.
  • It cites the Affordable Care Act and asks for information about when you had insurance coverage.
  • It lists the letter number in the accompanying payment voucher as 105C.
  • It asks that checks be made out to the IRS and sent to the “Austin Processing Center” at a post office box.

Identity Theft with Fake Returns

There are several fake tax return scenarios.  In one, identity thieves have somehow acquired your social security number and personal information.  They file a fake tax return and have the refund deposited into your bank account.  The thieves then contact you, usually by phone.  They pretend to be IRS agents or debt collectors for the IRS.  They demand that you immediately return the money.  The information they provide sends the money directly to the thieves.

In a similar scenario, once the thieves file your phony tax return and you receive the illegal refund, you get an automated call supposedly from the IRS.  The call accuses you of fraud and threatens criminal prosecution.  The caller provides a case number and a phone number so you can return the fraudulent refund.  The automated call scenario is simpler and cheaper for the thieves than using fake agents.

In yet another identity theft scam, thieves use phony tax preparation sites and phone numbers to steal people’s personal information.  The victim goes online to find a tax preparation service to file an e-return for taxes.  The phony site looks legitimate, and the unwary victim provides financial information to the scammers on the site.

Once your identity is stolen, it can take months of frustration and effort to clean up the mess the thieves make of your finances.  The FTC has come up with some useful tips to thwart identity theft tax scams:

  • File your tax return early if you can;
  • Use a secure internet connection for e-filing.  Even better, mail your return at the Post Office.
  • If you use an online tax preparation service, make sure you get the tax preparer identification number.  Legitimate preparers are required to have an IRS authorized ID.
  • Look for https at the start of the web address.  That signifies the page is encrypted.  Https should appear on every web page you visit.
  • Ask tax preparers about their data security policies.
  • If you discover that your identity has been stolen, visit www.IdentityTheft.gov to report it to the FTC.  Then, file an Identity Theft Affidavit with the IRS and get a personal recovery plan.

Frauds Perpetrated by Fake Tax Preparers

We’ve already mentioned fake tax preparation websites, but there are other forms of tax preparer fraud.  More than half of American taxpayers use professional tax preparers to help them file their returns.  While most offer legitimate services, there are crooks who will use tax season to fleece you of your money.  Remember, a legitimate tax preparer will always sign your return and enter his or her IRS Preparer Tax Identification Number.  If they will not sign the return, do not trust them.  Beware of tax preparers who promise a big refund before looking at your records.  Never use a tax preparation service that charges based on the size of the refund it can get you.  False claims and phony deductions can get you in big trouble with the IRS.  If it sounds too good to be true, you know it is.

Protecting yourself from fraud and identity theft requires constant vigilance and intelligent skepticism.  One last tip to prevent taxpayer identity theft is this.  You can get an identity protection PIN from the IRS.  This 6-digit PIN must be included on your tax return along with your social security number.  Once you opt into the program, the IRS will send you a new PIN each year through the mail.  The PIN system prevents thieves from using your social security number to file a fraudulent return.

Resources

www.irs.gov/newsroom/irs-wraps-up-dirty-dozen-list-of-tax-scams-for-2018-encourages-taxpayers-to-remain-vigilant

www.irs.gov/newsroom/tax-scamsconsumer-alerts

www.consumer.ftc.gov/blog/2018/03/watch-out-these-new-tax-scams

 

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This website has been prepared for general information purposes only. The information on this website is not legal advice. Legal advice is dependent upon the specific circumstances of each situation. Also, the law may vary from state-to-state or county-to-county, so that some information in this website may not be correct for your situation. Finally, the information contained on this website is not guaranteed to be up to date. Therefore, the information contained in this website cannot replace the advice of competent legal counsel licensed in your jurisdiction.

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