The IRS projected that tax fraud would rise from $6.5 billion in 2013 to an anticipated $21 billion in 2016. Fortunately, proactive cooperation between government agencies, tax preparation companies and tax software providers helped reduce the level of fraud, cutting the number of identity fraud victims in half from 512,278 over the first nine months of 2015 to 237,750 during the first nine months of last year. In spite of this progress, tax fraud occurs frequently. It is imperative that citizens stay informed to protect themselves from becoming victims. Here are some of the most common tax scams, what the IRS is doing to combat them and how you can protect yourself from them.
Filing Fraud
One common scam involves filing fraud. Here, the perpetrator steals your name and Social Security number in order to fill your tax returns before you do but with a different address listed so that your refund gets sent to them. Sometimes, the thief does this by intercepting your return by stealing it directly from the mailbox. To reduce this risk, the IRS has set up an alert system to flag returns that are filed using your name with a different address or employer. State governments, financial services providers and private sector partners are on the lookout for suspicious returns and to verify that refunds are being deposited into a bank account owned by the correct individual. The IRS and software companies are introducing stronger password requirements and a verification code to protect electronic filings. You can further reduce the risk of filing fraud by filing your taxes early, before someone else has an opportunity to file in your name. If you are filing your return through the mail, drop your return directly in a post office mail slot or hand it directly to your carrier to avoid mailbox theft.
Phishing Emails
A second common scam uses a fake “phishing” email pretending to be from the IRS. The email invites you to click on a link in order to claim your refund. When you click on the link, you are prompted to enter your Social Security Number. Once you enter your SSN, the perpetrator then uses it to commit filing fraud. Clicking on the link may also introduce malware to your computer that enables the perpetrator to steal personal information stored on your computer or transmitted when you log into online bank accounts. Being aware that the IRS does not contact people by email is the key to avoiding this type of scam. Do not open, respond to or even click on an email of this kind.
Vishing Phone Calls
Today’s most common variety of scam involves “vishing”, a kind of phishing that happens over the phone. Here, the perpetrator calls you pretending to be an IRS or Treasury Department agent. They claim that you are behind on your taxes and threaten you with jail unless you pay immediately. They then trick you into divulging personal information or paying them. As with phishing, awareness is the key to avoiding vishing scams. The IRS and Treasury Department do not contact taxpayers using this type of phone call. If you get this type of phone call, simply hang up.
