Last year the IRS paid out $3.6 billion in phony tax refunds. On the plus side, that amount is down from the $5.2 billion paid in 2012, thanks to greater enforcement by the IRS. And the loss could have been much worse. Over the last two years, the IRS says it has caught $40 billion in fake returns leading to the arrests of hundreds of identity thieves.
Still, consumers are at risk this time of year, thanks to smarter crooks and new ways to target victims. Read on to learn how scammers may be out to con you.
With all the personal information required to file a tax return, your identity is at special risk during tax season. Although identity thieves prefer to steal the tax identification or social security numbers from the deceased or those who no longer file returns, anyone’s personal information will do.
Once they have your personal information, the thieves will submit a tax return in your name along with fake documents to claim a tax refund they don’t deserve. Because they use their own address, the return goes to them, and you may be none the wiser until after you file your own return. That’s when you’ll receive a response from the IRS that your tax ID number or social security number has been used to file multiple returns.
You’ll be able to straighten the matter out in time, once you’ve proved to the IRS that your identity has been stolen and a false return has been submitted under your name. You will most likely get any refund due you . . . eventually. But the federal government will be out that money, and in the end, that costs us all.
Today’s crop of criminals are highly creative in their methods for stealing your identity and more. The IRS also warns of these common schemes that are part of its annual “dirty dozen”:
Email “Phishing” Scams
You’ve probably received one of those laughably obvious fake emails from that poor Nigerian prince eager to share his wealth with you if only you’ll give him your personal banking information first. Fortunately, most of us are too savvy to fall for these blatant scams.
The same can’t be said for a new wave of more sophisticated scams. Scam artists have become highly adept at “spoofing” or faking the look of real emails from such institutions as your bank and the IRS. Even the web site address may look convincing to the untrained eye. The criminals’ goal is to get you to click on the link where you’ll be taken to a fake website to enter your sensitive personal information, allowing the crook to steal your identity.
The IRS wants consumers to know that it never sends taxpayers requests for personal information by email. If you receive an email that does just that and purports to be from the IRS, report it to firstname.lastname@example.org.
The IRS also warns consumers that it doesn’t make phone calls to request personal information. If you get such a call, take note of the incoming phone number and hang up. It’s a scammer trying to con you.
Fake Tax Preparers, Phony Deals
Two other big scams targeting consumers at tax time, according to the IRS, involve fake tax preparers and phony tax refund deals. Here’s how each works.
Today anyone with access to a computer can print up the fake business cards of a legitimate tax preparer. The truly ambitious con artists may even take out office space as a venue for committing their crimes. But these fake preparers aren’t interested in helping you with your tax return. Instead, they’re out to steal your identity. So be sure to verify your tax professional’s credentials and check with your local Better Business Bureau.
Another way crooks lure consumers is by offering such deals as “instant returns,” “free money,” or other too-good-to-be true deals that require you to turn over your personal information and access to your bank account. But instead of a direct deposit of your refund into your bank account, your funds are drained by the crook.
Other tips from the IRS:
- Because putting your tax return with your personal financial information into a mail drop can be unsafe, whenever possible, file electronically. Other tips:
- Never sign a blank return.
- Review the entire return before signing it.
- Make sure your tax preparer signs the return and provides his or her IRS Preparer Tax Identification Number (PTIN).
- Ask ahead of time about the preparer’s fees. These fees should be fixed, not based on a percentage of your return.
The IRS encourages taxpayers to report any suspicious activities at Complain About a Tax Preparer.
Copyright DMG Financial