Tax filing season is a particularly fertile time for scammers to take advantage of taxpayers. With the stimulus payments that most Americans will receive as a result of the Coronavirus Aid, Relief and Economic Security (CARES) Act added to the mix, it is critical that taxpayers are on alert for scammers looking to steal their refunds and stimulus payments. As practitioners, we are tasked with having to inform clients of such activity. In practice, fraud is often identified when a taxpayer’s income tax return fails to qualify for e-filing and system-generated notifications are received stating: “The taxpayer has already filed a tax return”; or “The dependent of the taxpayer has already been claimed on someone else’s return.”
Often times, taxpayers only become aware that they’ve been victimized once they receive correspondence from the IRS. Thus, it is important for taxpayers to be aware that the IRS:
- Will never initiate contact through means of e-mail, text or social media
- Will never initiate contact via a phone call
- Will never make threats of lawsuits or arrests over the phone.
Equally important, taxpayers should be on alert for signs of tax-related identify theft:
- Receiving correspondence from the IRS inquiring about a suspicious tax return you did not file
- Inability to e-file a tax return because of a duplicate social security number
- Receiving an unexpected tax transcript in the mail
- Receiving correspondence from the IRS that an online account has been created in your name
What can you do to protect yourself from tax-related fraud?
“If you ain’t first, you’re last” – Ricky Bobby
By far, the most effective thing you can do is to file your return as soon as possible. Scammers’ entire schemes are predicated on fraudulent returns making it to the IRS first. Even if you’ve had information stolen, being the first to file a return in your name ensures your legitimate return will make it to the IRS first. It’s better the scammers receive the rejection notice than you.
Avoid phishing scams, malware and do not reply
Millions of fake emails can be sent in a day by a single computer in an attempt to extract personal information from unsuspecting victims. Messages will often be disguised to look appear as though the IRS is the sender, and links often will direct you to malicious sites that look like official IRS sites. As mentioned above, the IRS will never email you directly for personal or financial information. If you receive such an email, do not reply to it, do not click any links and do not open any attachments. Forward the message to firstname.lastname@example.org and delete it.
Learn more information on how to handle malicious phone, mail or fax solicitations.
When in doubt, shred it
Neither dumpsters nor your garbage can is safe. Stopping scammers from retrieving sensitive information is as simple as investing in a good shredder or utilizing a reputable document disposal company.
Protect your personal information
Do not carry or store sensitive documents, such as social security cards, Medicare cards, birth certificates, etc., in unsafe places such as a wallet, purse, or easily accessible rooms in your home. Doing so increases the opportunity for some good old-fashion fraud. Treat these items like a bagful of cash; lock them-up and know where they are at all times.
Use the post office
Like your garbage can, your mailbox is not safe. If you file your return by mail, please take the time to drop it off personally at the post office. The United States Postal Services provides certificates of mailing, USPS tracking, Signature Confirmation TM and Return Receipt as options to ensure the package is successfully delivered.
What should you do if you suspect tax-related fraud?
If you are a victim of identity theft, the Federal Trade Commission (FTC) recommends these steps:
- File a complaint with the FTC
- Contact one of the three major credit bureaus to place a “fraud alert” on your credit
- Close any financial or credit accounts opened by the thieves
If your social security number is compromised and you know or suspect you are a victim of tax-related identity theft, the IRS recommends these additional steps:
- Respond immediately to any IRS notice; call the number provided
- Complete IRS Form 14039-Identity Theft Affidavit
- Continue to pay your taxes and file your return, even if you do so by paper
If you have additional questions, contact Clayton McKervey for additional information.
The above represents our best understanding and interpretation of the material covered as of the date of this post. Things are moving at a rapid pace, and as such, information is subject to change. This information is provided for informational purposes only and is not intended to be a substitute for obtaining accounting, tax, or financial advice from an accountant.