How To Protect Your Tax Refund From Scammers, Identify Risks
Warnings about some guy calling pretending to be from the IRS — and demanding money — are so common, well, they’re practically cliche.
How can anyone run a tax scam any more?
Oh, they can. Complaints about the IRS impostor phone calls may be declining, but the scam remains hot enough to issue new warnings.
“The new wrinkle is that the scammer is stating that he is with the Department of Justice and is assisting the IRS in this matter,” according to Amy Nofziger, director of fraud victim support for the AARP.
Somehow, the scammers claim, the Justice Department is going after people who haven’t been paying their taxes. And taxpayers can get trapped in lots of other ways, too. It’s not just the phony phone calls that can steal your cash.
Crooks continue to attempt to use stolen Social Security numbers and other ID information to cook up fake tax returns in order to steal refund cash.
The Internal Revenue Service fraud detection systems protected about $7.6 billion in revenue between Jan. 1 and Oct. 3, 2018, according to the latest report from the National Taxpayer Advocate.
The crackdown itself also delayed the processing of almost $20 billion in legitimate refunds, according to the report. Tax fraud schemes also try to steal money by filing fraudulent state tax returns, too.
Michigan Attorney General Dana Nessel reported in mid-February that her office had brought charges against a Detroit racketeering ring where defendants allegedly took advantage of a state Homestead Property Tax Credit. Naturally, the scheme involved using other people’s Social Security numbers. The ring allegedly was able to illegally cash in on more than $100,000 in state tax credits, which are designed to help qualified homeowners or renters pay some of their property taxes.
Charges were brought against 12 people allegedly involved in a tax fraud scam that ran from February 2014 to April 2018. The Michigan Department of Treasury found potential illegal activity following a standard audit of the returns.
You can protect yourself from someone stealing your tax refund by being able to identify these scams:
Hackers Use Fake IRS Emails
Hackers would love to trick you into downloading malware onto your computer. One strategy: Scammers may send you a phishing email with an attachment labeled IRS Tax Account Transcript. It might be tempting to open it but it’s not really your tax information. It’s an email from a scammer.
Another form of a new phishing attack involves hijacking ongoing email conversations where the scammer sends a new message containing a malicious link or attachment — giving the appearance that the message is from a trusted source.
“Victims clicking on the link or opening the attachment are then prompted to provide personal information that could be used to submit fraudulent tax returns,” according to a warning from Florida Attorney General Ashley Moody‘s office.
Never share passwords or login credentials. Do not click on unsolicited links without giving the sender a phone call first. Make sure that you’re using the latest security patches and antivirus software.
‘Ghost Preparers’ Will Not Sign Return
Roughly 56 percent of taxpayers in the country rely on someone else to do their taxes. But some bad actors and scam preparers continue to prey on unsuspecting consumers.
One Michigan woman complained to the Better Business Bureau in 2018 that a rogue preparer opened “an unauthorized online bank account and had my federal and state tax return deposited in that account instead of using my personal bank account for direct deposit.” She claimed to have lost $7,900.
“He repeatedly lied about my return status,” the Michigan woman said.
The IRS warns that bogus tax preparers — who stay off the radar by not signing the tax returns that they prepare — may engage in refund fraud, steal ID information from some of your family members to file other fake returns, and even direct refunds into their own bank account rather than the taxpayer’s account. Such phony outfits may ask that you sign the return and mail it yourself. They also might only take cash upfront for payments. They want to leave no sign that someone else prepared your return.
The IRS site has a directory of federal tax return preparers — including enrolled agents and certified public accountants — where you may be able to double-check someone’s credentials. (See www.irs.gov.) The Better Business Bureau said many consumer complaints may involve hidden fees, as well.
They’ll Pretend To Be The Sheriff, Really
An on-going phone scam in 2019 involves scammers who pretend to be from the local police department or sheriff’s office and want to collect unpaid taxes for the IRS. The phone number that shows up on your caller ID may even have a local area code, which boosts the odds that you’ll pick up the phone. The scammers — who also can pretend to be from the IRS — want you to transfer money onto gift cards, such as Amazon cards or iTunes cards, to “avoid being arrested.”
They’ll Ask You To Pay With Gift Cards
The IRS isn’t going to demand that you pay a bill with a gift card, a prepaid debit card or a wire transfer. The IRS will not ask for your debit or credit card numbers over the phone. Only the scammers make such outlandish requests. Make payments by writing a check to the United States Treasury or see IRS.gov/payments for IRS online options to pay your taxes.
Protect Yourself With New ID Options
The Internal Revenue Service has expanded a voluntary program involving issuing new IDs to combat tax refund fraud.
Initially, the program was only offered to victims of identity theft. Now under a limited pilot program, even people who weren’t victims of tax return identity theft may able to get a new ID to use when filing your tax return. The pilot program started in Washington, D.C., Florida and Georgia. But this year, it’s being expanded to seven more states: Michigan, Illinois, California, Delaware, Maryland, Nevada, and Rhode Island. Those states report the highest number of identity thefts to the Federal Trade Commission.
Those taxpayers can obtain what the IRS calls identity protection personal identification numbers — known as IP PINs. A six-digit number is assigned to eligible taxpayers to prevent their Social Security number from being used on fraudulent federal income tax returns. The IP PIN enables the IRS to verify taxpayers identities when they file returns. You’d go to Get an IP PIN at the IRS site. Do not reveal your IP PIN to anyone other than your tax preparer. Share it only when you are ready to sign and submit your federal income tax return.
In addition, taxpayers who received a CP01A Notice in January can look at the bottom of the first column on that paperwork to spot your IP PIN. If you lost your IP PIN or didn’t receive your new one, Retrieve Your IP PIN for more information at www.irs.gov.
A new IP PIN is generated for each filing season and can be retrieved starting in mid-January of each year by logging into the account you create. The American Institute of CPAs has supported expanding the use of IP PINs to prevent identity theft and tax refund fraud.
“An IP PIN adds a layer of protection to a taxpayer’s IRS account,” said Susan Allen, CPA, senior manager for tax practice and ethics at the American Institute of CPAs. “One can never be too cautious when it comes to protecting their confidential financial information.”
If fraudsters use your stolen Social Security number, you might have no idea that anything like this took place. You only discover the mess when you electronically file your tax return and your return is rejected by the IRS system because another tax return already has been filed using your Social Security number. Or maybe the IRS sends you a letter saying it has identified a suspicious return using your Social Security number.
Watch the Buzz60 video below for the top cities where taxpayers tend to get larger refunds.