Diligence is the only vaccine against tax fraud
It’s tax time again, and once again an army of low-life tax scammers are back in business seeking a quick score at our expense. Here is our annual reminder of some common swindles and how to avoid them.
Email “phishing” scams top the list again this year. Phony emails from crooks trying to fool you into thinking they represent the IRS or an IRS-approved debt collector seek to convince you to surrender personal information. Those attempts have gotten increasingly sophisticated, and usually include links to bogus websites or attachments that can infect your computer and open a channel to your personal information.
Never open an unsolicited email claiming to be from the IRS, and never click on unexpected links or attachments. Phone scams are sharply increasing, particularly in connection with the various COVID relief payments under way. Calls from purported IRS agents or from someone claiming to be from the Taxpayer Advocate Service often include “spoofing” of IRS phone numbers, showing up on your caller ID as apparently legitimate government numbers. If you receive an unexpected call regarding taxes or COVID payments, hang up and report the call.
Additionally, this tax season has seen a surge in “robocalls,” automated voice messages threatening to suspend your Social Security number or demanding payment of unpaid taxes via prepaid debit card. Any contact along those lines are obvious scams. Hang up.
Another serious fraud scheme is to obtain enough of your personal info to file a fake tax return in your name with false information that generates a refund. Once the unearned refund hits your bank account, the scammers call to inform you, often in threatening tones, that an error has been made and demand that you submit repayment immediately to the scammer’s bank account or on a prepaid card.
According to the Federal Trade Commission, various imposter scams cost Americans $1.4 billion in 2020 alone.
To avoid being a victim, keep in mind a few facts about how the IRS does business. As a general rule, the IRS initiates every contact with a taxpayer via U.S. Mail, and legitimate correspondence including contact information that is easily verified. (Aside: IRS correspondence still looks like it comes from a 1970s IBM 360 mainframe). The IRS does NOT:
› Send unsolicited emails, text or social media messages directly to a taxpayer.
› Call to discuss tax matters or payments unless requested and scheduled.
› Demand payment of taxes without the opportunity to appeal in writing.
› Require a specific method of payment, or request payment by prepaid debit cards or gift cards or accept credit card numbers over the phone.
› Threaten to arrest a taxpayer, alter immigration status, or revoke driver’s license or Social Security numbers.
Another increasingly common attack involves posing as a private collection agency acting on behalf of the IRS and demanding payment directly. While the IRS does currently engage four private debt collection firms, such action is never taken until multiple attempts to resolve a tax bill have been exhausted and the taxpayer has not responded for at least one year and is always preceded by letters from both the IRS and the debt collector containing information to help you verify the legitimacy of the contact.
To reduce the chances of being a target, file your tax return as early as possible to minimize the time available for potential scammers to file phony returns. Also, safeguard your personal information carefully, change passwords on occasion and, if using third party tax software, be sure to enable two-factor verification (typically an email or text message confirming your identity). If you are newly engaging a paid preparer, ask for their preparer tax identification number and verify their credentials.