TAX RETURN FRAUD IS RAMPANT
"Hello Mrs. Smith, this is the IRS calling. You owe us $3,000 from ten years ago. If you don't pay right now we will have you arrested by the police. Please provide me with a valid credit card so we can resolve this issue."
According to a January 2015 news release from the IRS, for the period 2011 – 2014 the tax agency stopped 19 million suspicious tax returns and prevented the issuance of approximately $63 billion in phony refunds. Tax return fraud has become one of the worst issues impacting the tax preparation industry. Here in this article I’ll advise you of some of the major warning signs you should watch out for and what you can do if you become a victim of tax return fraud.
Weaponizing Phones and Email
In our present era of history virtually every American has been reduced to mere data. A unique set of numbers, including your social security number, date of birth and similar information identify you. You are data. If this vital information is stolen by fraudsters then your tax returns, credit history, banking and other financial data can become available to thieves.
Thieves can steal money without ever robbing a bank or using physical violence. Most money today is stored in computers, which have become the primary targets of thieves and fraudsters.
Bad guys will use telephones and emails to capture key data from you in order to gain access to your financial, tax and credit records. For example, some of my clients have received suspicious phone calls from individuals claiming to be from the IRS. These people call or email innocent victims, threaten them in various ways, and demand money or key personal information.
The IRS does NOT conduct business this way. Legitimate IRS communications include first class mail letters with contact information, certified mail letters, and official visits by IRS personnel. All IRS personnel have a unique “badge number” which they are required to provide when communicating with taxpayers.
Key Warning Signs of Fraud
Here are some key warning signs of fraud:
- You receive a phone call from someone claiming to be from the IRS. The caller makes threats against you, including a statement that ‘you will be going to jail if you don’t pay now.’ The caller may demand a credit card number immediately, or ask you to send funds via Western Union. Many of these callers speak with a foreign accent and may be located outside the United States. Further, they may engage in a tactic called “spoofing” where your caller ID may show a local phone number.
- You may receive what’s calling a ‘phishing’ email claiming to be from the IRS (or a state tax agency.) The email may make threats and demand information. Or it may contain links to sites that will infect your computer. Some types of ‘mal-‐ware’ will actually seize control of your computer and give remote access to fraudsters. They may acquire control over your computer at 6pm and begin accessing sensitive files at 2am when you sleep. (It’s a good idea to physically turn off computers at night by pulling the power cord out.)
- You suddenly stop receiving your US Postal mail. Days go by and you receive no mail. This may be a sign that fraudsters have filed a change of address with the Post Office diverting your mail to a location under their control. Your bank and credit card statements, tax refunds and other confidential documents may fall into the wrong hands. Contact the Post Office immediately if something like this happens. Post Office procedures require that notification be mailed to your current address in the event a change of address is filed.
- You receive a notice from the IRS stating that two tax returns have been filed for the same year. This is a classic sign of fraud. Bad guys typically file a fraudulent tax return early in January, collect large refunds on prepaid debit cards issued by the IRS, and then disappear. Subsequently, the legitimate taxpayer files a real tax return. See my advice below on how to handle this situation.
Never provide information to them. Demand the official IRS badge number of the caller and ask for a return phone number so you can call back. These questions will alert fraudsters that you are not a soft, easy target and they are likely to give up. If they don’t give up simply hang-‐up the phone.
Never provide personal information and delete the phishing email immediately. (Tell your email system that the email is spam so it is blocked in the future.)
What Can You Do If You Become a Victim of Tax Return Fraud?
The IRS has developed new security procedures to address the problem of widespread tax return fraud. The response is to issue an Identity Protection PIN number to victims. This PIN number is an additional means of authenticating a legitimate tax return and distinguishing it from fraudulent tax returns. If you are a victim of tax return fraud you may obtain an Identity Protection Pin number by filing IRS form 14039 (Click Here). Also, see further guidance to victims in IRS Publication 5027 (Click Here for this Publication).
(This information is readily available on the official IRS website at www.IRS.gov). Beware of fake websites.
Keep your Identity Protection PIN safe and locked up. At most only three parties should know of it: you, your accountant, and the IRS. If you provide copies of tax returns to a bank in connection with a loan application redact the PIN number from the copy of the return. Your banker doesn’t need to know this information. If you store electronic copies of your tax returns on a computer or the Internet then, again, remove the PIN code (shown at the bottom right corner of page two of IRS Form 1040) and replace it with blank white space.
The receipt of an IRS notice informing you that two returns have been filed for the same year is usually a clear sign of fraud. You should respond immediately by calling the IRS to confirm what is happening. Their general contact number is:
If you have questions or issues regarding an ongoing tax return fraud case you may reach the IRS department dedicated to this issue at:
I strongly recommend that victims of tax return fraud take steps to protect their financial and credit records. This can be done by subscribing to a credit monitoring service. Many reputable firms are available. Credit monitoring protects your financial privacy by promptly informing you if anyone tries to open a bank account or obtain a loan using your information.
Finally, everyone should shred or burn sensitive documents that contain social security numbers, dates of birth, names, addresses and other confidential information. Secure your computer by using a password, turn off the ‘guest user’ option for all computers, and use a strong password for Wi‐Fi networks.
For a more comprehensive list of counter‐measures you can take to protect your financial privacy see my free article on the subject, located in the Café portion of my website, called “Beware of Fake Shredders.”
The true identity theft is not financial. It's not in cyberspace. It's spiritual. It's been taken.
Certified Public Accountant Master of Business Administration
Tel: (207) 989-2700 E-Mail: GeorgeAdams@IntelligenceForRent.com
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