Step aside tax evaders, the IRS has a new criminal in their crosshairs: tax scammers and identity thieves. Don’t think it will happen to you? Think again. As of this March, the IRS reported identifying 42,148 tax returns with $227 million claimed in fraudulent refunds and prevented the issuance of $180.6 million (79.6%) in fraudulent refunds. Newsweek estimates that tax scammers have been able to scam about $6 billion a year from the IRS.
- A scammer accesses your information through hacking, having someone on the inside of an organization with access to social security numbers, or by purchasing the information on the darknet.
- A scammer contacts you and convinces you to give up personal or financial information.
Stolen Identity Refund Fraud (also known as SIRF) is a real problem. It has become a very popular crime that ranges from solo scammers to networks of people who steal information and then file fraudulent returns. Scammers steal personal information from hospitals, nursing homes banks, etc. Sometimes they hack into personal or company computers, and sometimes they have an informant inside and organization with access to information like names, social security numbers and addresses. They also run lots of scams that involve contacting a taxpayer in some form and getting them to divulge crucial information – or pay them money.
From there, they take the information they’ve gathered and file bogus tax returns. The refunds are sent to mailboxes or debit cards controlled by the scammers and it’s all done very early on in the tax season before the real taxpayer gets around to filing.
There are lots of scams out there right now that you should know about. Here is a round-up of the most popular ones. Be sure to share this information with clients, family, and friends so that they know.
Tax Scam Round-up
Tax Refund Scam (added 3/06/18)
A new twist on an old scam. Criminals are depositing fraudulent tax refunds into individuals’ actual bank accounts, then attempting to reclaim the refund from the taxpayers.
Here are the basics:
- Hacks tax preparers’ computers to steal taxpayer data.
- Uses the stolen information to file tax returns as the taxpayers.
- Has refunds deposited into taxpayers’ bank accounts.
- Contacts their victims, telling them the money was mistakenly deposited into their accounts and asking them to return it.
Hotmail Email Scam (added 12/18/17)
The Internal Revenue Service today warned taxpayers and tax professionals of a new email scam targeting Hotmail users that is being used to steal personal and financial information.
The phishing email subject line reads: “Internal Revenue Service Email No. XXXX | We’re processing your request soon | TXXXXXX-XXXXXXXX”. The email leads taxpayers to sign in to a fake Microsoft page and then asks for personal and financial information.
The IRS has received over 900 complaints about this new phishing scheme that seems to exclusively target Hotmail users.
W-2 Phishing Scam Targeting Schools, Restaurants, Hospitals, etc. (added 2/7/2017)
According to IRS Commissioner John Koskinen, “This is one of the most dangerous email phishing scams we’ve seen in a long time. It can result in the large-scale theft of sensitive data that criminals can use to commit various crimes, including filing fraudulent tax returns.’’
Here’s how the scam works: Cybercriminals use various spoofing techniques to disguise an email to make it appear as if it is from an organization executive. The email is sent to an employee in the payroll or human resources departments, requesting a list of all employees and their Forms W-2.
The Security Summit partners urge all employers to be vigilant. The W-2 scam, which first appeared last year, is circulating earlier in the tax season and to a broader cross-section of organizations, including school districts, tribal casinos, chain restaurants, temporary staffing agencies, healthcare and shipping and freight. Those businesses that received the scam email last year also are reportedly receiving it again this year.
In the latest twist, the cybercriminal follows up with an “executive” email to the payroll or comptroller and asks that a wire transfer also be made to a certain account. Although not tax related, the wire transfer scam is being coupled with the W-2 scam email, and some companies have lost both employees’ W-2s and thousands of dollars due to wire transfers.
Quickbooks Phishing Scam
The Better Business Bureau Northwest is warning users of Quickbooks accounting software of a new phishing scam. According to Accounting Today, “Victims receive an email in their inbox with the subject line, “QuickBooks Support: Change Request.” The email claims to be a confirmation from Intuit that a business has changed its name and contains a hyperlink that the recipient can click on to cancel the request. However, if email recipients click on the link, it directs them to a site that downloads malware to their device.”
Impersonating an IRS Agent
One of the most popular ways to get information from a taxpayer is by impersonating an IRS agent. This usually happens via phone but can also be through email or letter. The scammer will tell you that you owe the IRS money and ask for immediate payment over the phone. Scammers have asked for payments via credit card, Western Union, MoneyGram, bank wire transfers, bank deposits made into another person’s account, on iTunes Gift Cards, Green Dot Prepaid Cards, MoneyPak Prepaid Cards, Reloadit Prepaid Debit Cards, and other prepaid credit cards.
The scammers are always very pushy and use threats to scare people into paying them money. They can even alter what can appear on your caller ID so that the number looks legitimate. It’s important to know that the IRS doesn’t usually call taxpayers and if they do call, they will never ask for payment of any kind over the phone.
Bogus Student Tax
This scam also comes in the form of a phone call demanding payment for a non-existent tax that they call the “federal student tax.” They demand payment through wire transfer and when you don’t comply, they will threaten to call the police.
Orlando Tragedy Scam
This was draws on the recent shooting in Orlando. It’s so sad that people find ways to take advantage of others who are just looking to help out after such a terrible tragedy. These schemes can come by way of phone, email, social media, or in-person solicitation of funds to fake charities. Make sure you only donate to known charities. If you are unsure, you can check out charitynavigator.org or irs.gov for the charity’s name.
Other Phone Scams
Scammers don’t just impersonate IRS agents, they will impersonate any entity to try and gain taxpayer information or payment. Here’s a list of other schemes that have been pulled.
- Soliciting W-2 information from payroll and human resources professionals
- “Verifying” tax return information over the phone
- Pretending to be from the tax preparation industry
Tax Refund Scam Artists Posing as Taxpayer Advocacy Panel
This one is an email scam that notifies taxpayers about a tax refund. The email appears to be from the Taxpayer Advocacy Panel and the emails appear to be legit. The goal is to trick unsuspecting victims into providing personal and financial information. Do not respond or click the links in them.
W-2 Scam Targeting Payroll and Human Resources Professionals
Another phishing email scheme that purports to be from company executives and requests personal information on employees. According to the IRS, “The email contains the actual name of the company chief executive officer. In this scam, the ‘CEO’ sends an email to a company payroll office employee and requests a list of employees and financial and personal information including SSNs.”
Phishing Scam Targeting National Capital Area
Email scammers citing tax fraud are trying to trick victims into verifying “the last four digits of their social security number” by clicking on a link provided. The criminals specifically state that this is for tax filers in the District of Columbia, Maryland and Virginia. As a further attempt to trick residents of the Capital region, the email scam even suggests that information from recent data breaches across the nation may be involved.
The IRS is doing everything they can to fight scammers. They’ve expanded the filters they use to detect identity theft refund fraud from 11 in 2012 to 183 in 2016. Tax returns identified by these filters are held during processing until the IRS can verify the taxpayers’ identities. There’s also a new mandate that no credit or refund for an overpayment for a taxable year shall be made to a taxpayer before Feb.15 if the taxpayer claimed the Earned Income Tax Credit or Additional Child Tax Credit on the return. This means next year, taxpayers could wait longer for their return in order to give the IRS time to verify the identity of the person receiving the refund. More on the mandate here.
Tax Fraud Quick Facts
The IRS will never:
- Angrily demand immediate payment over the phone, nor will the agency call about taxes owed without first having mailed you a bill.
- Threaten to bring in local police or other law-enforcement groups to have you arrested for not paying.
- Demand that you pay taxes without giving you the opportunity to question or appeal the amount they say you owe.
- Require you to use a specific payment method for your taxes, such as a prepaid debit card.
- Ask for credit or debit card numbers over the phone.