Avoid Being Scammed This Tax Season

Avoid being scammed during tax seasonTax season officially began on January 19, which was the earliest that you could submit a tax return for the tax year 2015. Unfortunately, tax season also means scam season, and there are any number of unscrupulous individuals out there trying to get your money.

Scams related to taxes tend to proliferate around this time of year, taking advantage of the uncertainty or fear that many feel regarding the IRS. Some try to claim your refund by filing a tax return using your information, while others seek to bilk you out of thousands by claiming to represent the IRS in their communications with you.

Each year, the IRS releases information to the general public about scams perpetrated in their name. These scams generally fall into one of three categories:

  • Phone scams –These scams generally begin with a caller identifying themselves as an IRS agent. They may claim that you owe the IRS payment from a previous years’ filing, give you a phony agent ID number, and your caller ID may even indicate that the call originated from the IRS. In some versions of this scam, you are asked to make payment via a credit card or the “agent” may threaten you with arrest if you do not pay. If you have any questions regarding the legitimacy of a phone call received from the “IRS,” you can contact the actual IRS at 800-829-1040.
  • Phishing scams – Fake websites and phony emails are the hallmarks of a phishing scam, and yet many people fall for them every year. You receive what appears to be a legitimate email from the IRS asking you to update your personal or financial information in your IRS file. This email may include a link to what appears to be the IRS website, and you may be encouraged to visit this site in order to update your information. However, the IRS will never initiate contact via email and ask for your personal or financial information.
  • Identity theft – Phone and/or phishing scams are sometimes the beginning  for scammers seeking to access information that will allow them to steal your identity. Nearly 13 million people had their identity stolen in 2014… and the only information required to file a tax return is a name, date of birth, and social security number.  If someone files for a refund using your identity, you may not find out about it until after you’ve filed your own (legitimate) return.

How the IRS is Combatting Scams

The IRS works with the software industry to develop standardized data elements that aid in identifying fraudulent returns before they ever enter the tax processing system. The average taxpayer or paid preparer will likely never notice the changes in the software program they are using, but they are critical in verifying the legitimacy of returns submitted.

One such data element reported by software providers to the IRS is the duration of time it took to create the return. Many times fraudulent computer-generated returns are filed in bulk; by noting the duration of time taken to create the return, bulk-filed returns can be flagged before they enter into the processing system.

Other changes that you may notice in tax prep software include:

  • More stringent password guidelines
  • Automatic logout for periods of inactivity within the software
  • Lockout for unsuccessful login attempts
  • Security questions to aid in password recovery
  • Out-of-band verification (a form of two-factor authorization) to gain access to account

There is also an ongoing dialogue aimed at sharing the details of fraudulent schemes seen regularly by the IRS, states, and tax industry professionals; the sharing of this information serves to provide increased protection to taxpayers.

Protect Yourself From Tax Scams

For all of the precautions and protections provided by the IRS and the tax industry, full protection is incomplete without action by you, the taxpayer. Protecting yourself from tax scams goes much further than just paying attention during tax season; you have to be vigilant all year long.

  • Protect your kids – up to 8% of persons under the age of 18 are victims of identity theft each year. Tax fraudsters can use a child’s social security number as part of their scheme. Checking to see if your child has a credit report can alert you to possible fraud involving your child.
  • Be careful what you share on social media – your home address, birthdate, and other identifying details can be used against you by someone seeking to steal your identity.
  • Don’t fall for phishing scams – most of us know enough to realize there isn’t a Nigerian prince out there who wants to give us money, but other forms of phishing scams that come through your email can be more subtle and convincing. Don’t provide personal information via email, particularly from an unsolicited source.
  • Protect your personal information – social security cards and other documents with personal information should be put under lock and key. Carrying this kind of information with you in your wallet or having it easily accessible in your home is invitation for disaster.
  • File your income tax as early as possible – once your return is filed, an identity thief can’t file again using your information.

Remember, the IRS does not initiate contact with taxpayers via phone, email, or social media. If you have been contacted in this way by someone claiming to be with the IRS, please report it to the IRS.

And finally, take steps to secure your personal information online. This is one instance in which an ounce of prevention is worth a pound of cure.