Money Advice

3 ways tax scammers are targeting you

Posted by The Simply Money Advisors Team on Mar 20, 2019 6:47:56 AM

Think you can tell a fake IRS notification from a real one?

Don’t get too cocky.

Because while it can be easy to think to yourself, “I would never fall for something like that,” tax scammers still fool people all the time.

Just ask the 13,500 victims who have fallen for fake IRS phone calls over the last six years alone, losing more than $67 million.[1]

And the most common type of scam victim isn’t the frail, elderly person living alone you might be imagining.

In fact, AARP recently discovered most scam victims:

  • Are comfortable interacting (and doing business) with strangers.
  • Are more likely to be risk takers.
  • Believe they’re too smart to become a victim.

Simply put, it doesn’t matter your age or gender – anyone can fall for a scam.

Watch out for these three tax scams not only during tax time, but in some cases, all year around.

Phishing scams (emails, texts, calls)

A phishing scam works like this: a scammer pretends to be someone else, or, in this case, the IRS itself. To convince you to divulge personal and sensitive information, the scammer attempts to contact you one of three ways:

  • Email
  • Text
  • Phone call

The email and/or text will look and sound legitimate, as if it’s coming from the IRS or an IRS worker.

But the IRS does not use email or text to initiate correspondence.

If you receive a suspicious email that claims to be from the IRS:

  • Do not click on any links or attachments.
  • Forward the message to phishing@irs.gov.
  • Delete the original email.

If you receive a suspicious text that claims to be from the IRS:

  • Do not click on any links or images.
  • Forward the text to the IRS at (202) 552-1226 (include the phone number it came from, if possible).
  • Delete the original text.

As for phishing phone calls, receiving one can be unnerving. The caller will most likely claim you owe the IRS money and even threaten you with jail time if you don’t pay up immediately.

But the IRS will never demand immediate payment, they will never threaten you, and they will never ask for unusual methods of payment (such as via debit cards or gift cards).

If you receive a suspicious call from someone who claims to be with the IRS:

  • Do not give out any personal information.
  • Hang up immediately.
  • If you’re in a situation in which you think the IRS might be legitimately trying to contact you, do not use any numbers given to you directly or via voicemail. Instead, you should initiate the call with the IRS at 1-800-829-1040 and explain the situation.

Unfortunately, phishing scams probably aren’t going away anytime soon. According to the IRS, there was a 60% increase in these types of scams last year.

Stay vigilant.

Tax preparer fraud

Did you realize more than half of American taxpayers use someone else to prepare their return?[2]

This kind reliance on a third party provides a fantastic opportunity for a scammer to weasel his or her way into your financial life and steal your personal information.

And we know most tax professionals are straight-up, honest people. But, just like we encounter in the financial services industry, there are some bad apples looking to steal from you.

Be suspicious if anyone:

  • Promises you an inflated refund.
  • Asks you to sign a blank tax return.
  • Charges fees based on how much of a refund you’re expecting.

If you work with someone during tax time, be sure he or she has a Preparer Tax Identification Number (PTIN) and is registered with the IRS.

And here’s something most people may not realize: you are legally responsible for whatever is entered on your tax return – even if someone else prepared it.

Tax identity theft

This is a biggie. And it can be the most damaging of all the scams we’ve mentioned thus far.

Tax identity theft is when a scammer uses your stolen Social Security number to file a fake tax return in your name with the goal of nabbing a refund. Unfortunately, you won’t know it’s happened until you try to file your real tax return and the IRS informs you that you’ve already filed.

And if you think your information isn’t “out there” for scammers and hackers to steal, think again.

According to USAToday, billions of people were impacted by data breaches in 2018. Granted, in some cases, the information stolen is merely an email address.

But it can get worse. Much worse.

One of the most damaging breaches of all-time came in 2017 when hackers gained access to data held by the credit bureau Equifax: more than 143 million Americans had incredibly sensitive information (including Social Security numbers) stolen.

It’s not a question of “if” your personal information will be stolen. Rather, it’s a question of “when.”

Other signs of tax identity theft include:

  • Receiving an unexpected W-2 for a job you don’t have or income you didn’t make.
  • Receiving tax transcripts you didn’t request.
  • Getting a refund that’s much larger you expected or receiving one before you’ve even filed.

There is some good news here, though. The IRS has implemented better methods for verifying identity, leading to a 40% drop in tax-related identity theft from 2016 to 2017.[3]

The bad news? This just means scammers will get more creative with their tricks and deceptions in the future.

One of the best ways to help prevent tax identity theft is to file your taxes as early as you possibly can. This way, if a scammer would happen to use your stolen information to file a fake return, the return wouldn’t be accepted since you already filed.

If you discover you’re a victim of tax identity theft:

The Simply Money Point

For all the good technology can provide, we unfortunately live in a day and age in which criminals can manipulate that technology to steal from unsuspecting (and trusting) individuals.

To reduce your risk of becoming one of their victims this tax season, we at Simply Money Advisors implore you to always stay suspicious. And never give out your personal information to anyone who initiates first contact.

 

[1] https://www.creditkarma.com/tax/i/irs-tax-scams-things-to-know/

[2] https://www.irs.gov/newsroom/tax-return-preparer-fraud-ranks-on-2018-dirty-dozen-taxpayers-urged-to-choose-reputable-tax-preparers

3 https://www.cnbc.com/2018/04/10/worst-tax-scams-to-watch-out-for-this-year.html

 

Topics: Scams

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