Protect Yourself from Tax Refund Scammers

Tip of the Month

March 2018

Get this Article Get this Article & Suite of Tools

Technology: Keeping Email Safe
Technology: Spear Phishing - An Insidious Tactic Targets the Scam-Savvy
Tax Scam Season is Back

1040 Tax Calculator
Estate Tax Liability Calculator
Net to Gross Paycheck Calculator

Protect Yourself from Tax Refund Scammers

Tax Fraud Although tax filing season has been officially open only since Jan. 29, the Internal Revenue Service (IRS) is warning that reports of refund scams are already skyrocketing. Here’s an overview of the most common type of scam and tips to avoid becoming a victim.

The Scam

Hackers steal current data from tax returns, which also might include Social Security numbers and bank account information, from infected computer hardware. Using this stolen data, the cybercrooks file fraudulent claims on behalf of the victimized taxpayer. Refund payments are made to these innocent victims – often via direct deposit to their banking accounts. At this point, the scammers might pose as IRS agents and call the unwitting victims to demand return of the refunds. Sometimes the call is a recording accusing the taxpayer of fraud and threatening arrest and other scary consequences.

Red Flags and What To Do

Red Flag	What to Do
√ A refund check via direct deposit that you were not expecting.	Check with your tax professional to verify that the deposit is unexpected. Contact your bank to discuss either changing your security information or closing that particular account.
√ A check arrives in the mail for a refund you did not expect.	Contact your tax professional. Return the check promptly to the regional center that sent it. Write “VOID” on the check and include a copy of IRS Form 14039 and attach a note to let the receiver know you have been a victim of a refund scam.
√ Any type of phone call that is intimidating or threatening, or requires financial recompense from anyone claiming to represent the IRS. The IRS does not make phone calls like this to taxpayers.	Unsure? Call the IRS on its toll-free numbers (800-829-1040 for individuals or 800-829-4933 for businesses) to verify before you take any action.
√ A suspiciously fast refund check. It normally takes at least 10 days for a refund check to arrive by direct deposit (the fastest mode of refund). The IRS noted that fraudulent refunds were showing up in bank accounts just days after the Jan. 29 start of tax season.	Send the check to the IRS, and tell them you believe this refund resulted from hijacked data and that you are a victim of a refund scam.

Heads-Up

Although the IRS has no explanation for how the thieves were able to get into the system within hours of the start of the filing season on Jan. 29, speculation has run rife. Some have wondered if the cybercrooks had inside help. The IRS emphatically denies that the problem originated within IRS systems or data. The hacking seems to have targeted businesses specifically created to prepare and file tax returns. Additionally, some think the recent major data breach at Equifax has placed millions of people at potentially greater risk of having their personal information stolen.

The IRS expects victims of refund scams to be proactive and return refunds promptly that were issued in response to a fraudulent claim. To add insult to injury, it may take up to four months before victims are able to get the legitimate refunds that are due to them.

Forewarned is forearmed. There are some things you can do to protect yourself. First, discuss this issue with your professional tax advisor. Plan to file as promptly as you are able to do so. Scammers count on being able to get their fraudulent filing to the IRS before the legitimate tax returns arrive.

Get this Article Get this Article & Suite of Tools

These articles are intended to provide general resources for the tax and accounting needs of small businesses and individuals. Service2Client LLC is the author, but is not engaged in rendering specific legal, accounting, financial or professional advice. Service2Client LLC makes no representation that the recommendations of Service2Client LLC will achieve any result. The NSAD has not reviewed any of the Service2Client LLC content. Readers are encouraged to contact their CPA regarding the topics in these articles.