Tax Scams and Identity Theft: What You Need to Know

By now, you should have received all of the necessary forms and paperwork required to complete your 2015 tax returns. This year, though, you may not want to wait until the last minute to file your taxes, lest an identity thief tries to beat you to the punch and steal your refund. According to the Identity Theft Resource Center, 781 data breaches occurred in 2015, exposing over 169 million records containing personally identifiable information (PII). The Internal Revenue Service (IRS) itself was not immune to hacking as the tax returns of more than 300,000 people were compromised last year. This certainly opens the door to all kinds of scamming possibilities, especially fraudulent tax filings. In 2013, the IRS paid out an estimated $5.8 billion in fraudulent tax refunds.

If the IRS notified you that your tax return information was exposed in the 2015 breach, you are especially at risk. In fact, if your Social Security number or other personal information was compromised in any data breach over the last several years, criminals can purchase your information in online black markets and piece it together to file a fraudulent return. Filing your 2015 tax return as early as possible will drastically reduce an identity thief’s chance of submitting fraudulent tax returns in your name. Keep in mind that if an identity thief attempts to file your tax return, you may not learn about it until your legitimate return is filed and subsequently rejected.

In addition to filing early, it is important to be aware of current tax scams aimed at separating you from your hard-earned money. The most prevalent tax scams include:

  • Phone Scams: These are unsolicited phone calls from scam artists claiming to be IRS agents. They accuse their victims of owing back taxes and attempt to scare them into sending money in order to pay the fake bill. These scammers may even leave urgent-sounding voicemails with a callback number if the potential victim does not answer the phone.  They also employ call spoofing technology to make it appear that the call originated from the IRS.
  • Email Scams: Phishing emails appearing to come from the IRS attempt to lure potential victims into opening malicious attachments, clicking on malicious links, or sending personal information or money to scammers. Scammers are also targeting people who use tax preparation software by emailing malware-infected attachments disguised as tax software updates or account alerts to try to gain access to victims’ tax files or login credentials.
  • Website Spoofing: Some scammers will go as far as spoofing a web address and creating a fraudulent website designed to look like a legitimate IRS or tax preparation company’s site in an attempt to fool their victims.

To see a full list of currently circulating IRS tax scams, be sure to read the IRS webpage titled “Dirty Dozen Tax Scams for 2015.”

To prevent yourself from falling victim to these tactics, remember the following:

  • If you do owe taxes, the IRS will send you a bill in the mail. They will never call you and demand payment or require that you pay your bill using wire transfers or prepaid debit cards. The IRS will also never ask for your credit card or bank account numbers over the phone.
  • The IRS will never threaten to have you arrested if you do not pay immediately.
  • Never give out personal information over the phone or email, no matter what actions the caller or sender threatens to take.
  • If you are targeted by these scammers, be sure to use the U.S. Department of the Treasury’s online reporting tool and the Federal Trade Commission’s Complaint Assistant to report the incident. File a report with your local police department as well.

If you believe you have been a victim of tax-related identity theft, contact the IRS directly at 1-800-829-1040. An IRS representative will walk you through procedures for verifying your identity and rectifying the situation. You can also download Form 14039 from the IRS website and submit it if you believe you are a victim of identity theft. Lastly, consider taking extra precautions like monitoring or freezing your credit if you think criminals are in possession of your PII.