Tax Scams

Tips For Avoiding Tax Season Scams

Falling victim to a tax scam is perhaps one of the biggest things Americans wish to avoid more than tax season itself. While tax filing software and electronic submission of returns have made it easier to settle your bill with the IRS, cyber criminals will try to take advantage of taxpayers. Methods of tax return scams vary, but a typical result is a fraudulent return filed in your name with your refund deposited in someone else’s account.

How Many Americans are Affected by Tax Scams?

According to the Internal Revenue Service (IRS), tax scams have affected thousands of people with a total loss in the millions of dollars, not to mention all of the personal information stolen. And that’s only counting the number of victims cyber criminals have succeeded in scamming, so we can assume that hundreds of thousands more were initially targeted.

Unfortunately, the number of tax-related phishing scams has risen dramatically in recent years, with the IRS reporting a 400 percent increase in phishing and malware incidents between 2015 and 2016. Individuals aren’t the only targets of email phishing scams; cyber criminals also target tax preparation professionals, HR and payroll employees within companies, and local governments as a means of stealing W-2 information.

What do Cyber Criminals Do With Your Personal Information?

As recent data breach incidents have illustrated, we are only just learning the extent to which our sensitive and personal data can be compromised online. This information is extremely valuable to scammers, who can put together an individual profile of a person from multiple online sources. From viewing your birthdate on social media to seeing your full name in your email address, much of this information is available with little effort. Of course, key pieces of information needed to file a fraudulent return, such as your SSN and annual income, are harder to obtain, which is where hacking and phishing come in.

The Top 5 Popular Tax Scams

Every year the IRS releases a list of its “dirty dozen” most common tax scams. Some of these approaches are used to target taxpayers throughout the year, but they all peak during tax season. Here are the five IRS tax scams you’re most likely to encounter, including in our local Vermont and New Hampshire communities.

Phishing ScamsEmail and Website Phishing

As mentioned, this is the fastest growing category of tax scam in recent years. Cyber criminals will try to compel you to click on a fake link in an email or on social media and other websites. Usually they impersonate the IRS and claim to be contacting you about a tax bill or refund. Don’t fall for it–this isn’t a legitimate method of communication for the IRS.

Besides impersonating the IRS, tax scammers may send you an email that appears to be from your employer enticing you to log in to see your new or updated tax form. Once you use your company login, criminals can steal your username and password to obtain your real W-2 and other sensitive data. Scammers may also pose as your tax preparer or a representative from a tax preparation program.  One way you can test links you are unsure of is to hover your cursor over it to see the actual, complete URL. If it seems suspicious, don’t click.

Fake IRS CallsFake IRS Phone Calls

This is a tried-and-true method for thieves claiming to be IRS representatives in order to collect personal information or steal money in the guise of collecting a penalty. Often these calls take on a threatening tone as the con artist tries to leverage the possibility of arrest, deportation, or revocation of your driver’s license unless you immediately pay the alleged fine. Criminals are sophisticated enough to target taxpayers based on their proficiency in speaking the English language, and will speak in the native language of those who aren’t fluent in English.

Remember that the IRS will always send you an official letter in the mail first before initiating any other type of contact including phone calls. They will not ask you to pay outstanding balances or penalties through unusual methods such as gift cards or prepaid credit cards.

Recently, some criminals have been filing fraudulent tax returns and using the taxpayer’s real bank account for the refund deposit. The criminal then contacts the victim claiming to be the IRS and demanding that the money be returned.  Contact your bank immediately if this happens to you!

Inflated RefundsInflated Refund Advertising

Some tax scammers pose as tax preparers and bait potential victims with the promise of bigger refunds. You might see advertising for this kind of scam on a community flyer, online ad, fake storefront, or posting on a local listserv or community group. Beware if the so-called preparer asks you to sign a blank return, quotes refund figures before they’ve reviewed your tax documents, or charges a service fee as a percentage of your refund.

Another recent scam related to tax refunds appears in the form of an email posing as the Taxpayer Advocacy Panel (TAP). However, TAP is a voluntary advisory board to the IRS. It has no reason to request personal or financial information.

Last Minute Scams“Last-Minute” Scams

Now that the April 18th filing deadline is quickly approaching, tax scammers are executing their final trick: email phishing messages related to a last-minute issue, such as changing their refund destination to a prepaid debit card from a bank account or physical check. You may also receive a message from a criminal masquerading as a tax preparer and asking you to login to your online account to make changes.

Localized ScamsLocalized Scams

Sometimes tax scammers pose as organizations or important figures in your community. For example, New Hampshire residents have been targeted by criminals claiming to be calling from a NH Sheriff’s department. And in Vermont, some tax scams involve impersonation of the state’s Department of Taxes. Whether you are contacted by someone masquerading as the IRS or a local tax agency, be alert for any suspicious signs and take extra steps to verify a request before sharing personal information or making a payment.

How Does The IRS Contact You?

The IRS Doesn't Contact Tax Payers By Email, Text or Social Media

With so much sophistication and variation in today’s tax-related scams, how can you tell the difference between fake and authentic communications from the IRS? First of all, the IRS mainly communicates via old-fashioned snail mail. As stated on their website:

“The IRS initiates most contacts through regular mail delivered by the United States Postal Service. However, there are special circumstances in which the IRS will call or come to a home or business, such as when a taxpayer has an overdue tax bill, to secure a delinquent tax return or a delinquent employment tax payment, or to tour a business as part of an audit or during criminal investigations. Even then, taxpayers will generally first receive several letters (called “notices”) from the IRS in the mail.”

So, if someone contacts you claiming to be the IRS and you haven’t received any notices through the mail, it’s probably a scam. Also, tax payments are supposed to be made out to the United States Treasury and the IRS only collects payments through Electronic Federal Tax Payment System (EFTPS), electronic funds withdrawal during e-filing, same-day wires, check or money order, or cash through one of their retail partners. In other words, they won’t ask you to send them a prepaid debit card or make your check out to a different entity. This is an especially important distinction if you suspect you’ve received a fake IRS letter demanding payment to something other than the US Treasury.

Where To Report IRS Tax Scams

  • To report a phone scam, contact the Treasury Inspector General for Tax Administration through their “IRS Impersonation Scam Reporting” web page or by calling 800-366-4484.
  • You can also report phone scams to the Federal Trade Commission through the “FTC Complaint Assistant” on FTC.gov. Mention “IRS Telephone Scam” in the notes.
  • To report suspicious emails claiming to be from the IRS or related entities like the Electronic Federal Tax Payment System, forward the message to phishing@irs.gov.
  • Vermont residents can report potential tax scams to the Attorney General’s Consumer Assistance Program (CAP) at 1-800-649-2424, or go to vermont.gov for more information.
  • Residents of New Hampshire can report tax fraud to the NH Department of Revenue Administration.
  • Your local police department is also a great resource if you need to report a tax scam or think you’ve been victimized by one.

Local Help From Union Bank

Union Bank Office

If you want more information about tax scams or identity theft, our friendly and knowledgeable employees are here to help. You can contact us by phone or email, stop by your local branch office, or read our other blog posts on protecting yourself from scams and identity theft.  And remember that just like the IRS, Union Bank and other financial institutions would never solicit your personal information via email, text message, or telephone call.