Tax fraud 2018: 3 top scams to beware, from fake IRS refunds to realistic emails and phone calls
Let’s say you did everything right this year. As soon as Jan. 23 rolled around, your tax forms were out the door — way ahead of the April 17 Tax Day deadline. And unlike the 26% of Americans who said in a recent TaxSlayer survey they plan to spend their refunds treating themselves, you’ve wisely decided to squirrel it away for a rainy day: As soon as you saw the cash hit your account, you stashed it in a hard-to-access savings account so you wouldn’t be tempted to spend it on something fun.
Unfortunately — as foolproof as the above playbook sounds — your failure to double-check the provenance of your tax refund could cost you. In a recent fraud alert, the IRS noted an uptick in a new flavor of refund fraud specifically involving phony direct deposits. According to the IRS, the number of cases recently rocketed from a “few hundred to several thousand in just days.”
In those scams, fraudsters use your personal information to claim a refund on your behalf. Then when it hits your bank account, scammers either pose as IRS officials or some form of collections agency to get you to return the money to them. In some cases, perpetrators have created impressively authentic fake IRS letterheads and even employee profiles to make the claims look like they’re coming from actual government officials, according to security journalist Brian Krebs.
In other words, even if you didn’t click on any suspicious emails, you might still be susceptible to identity theft. A thief may have been able to hack your tax preparation service, for example, or gotten some of your personal information from an unwitting payroll official at your employer.
Alas, tax refund fraud is incredibly common: In a 2016 report, the Government Accountability Office found that the IRS paid out more than $3 billion in refund checks to identity thieves in 2014. Past scams have targeted a range of demographic groups, from students and immigrants to charitable givers and those seeking tax prep services. (One red flag for the latter? Watch for any professional that charges a fee as a percentage of your refund.)
Want to look for other warning signs of increasingly sneaky scammers? Here are three common tricks to beware.
1. You get your tax refund right on time — or so you think
Let’s say you already submitted your return. Roughly three weeks later, approximately $3,000 was routed into your bank account via direct deposit. You spend a little of the money on a nice night out and put the rest into your savings account. A few days later, you get a phone call saying the refund you received wasn’t actually yours. As the smart consumer you are, you know the person on the other end of the line is completely full of it, because the IRS will never call you to demand “immediate payment.”
Unfortunately, while that may indeed be a scammer calling you, they might be one who has successfully tricked the IRS into depositing a fraudulent refund into your account. If that has happened, you will actually need to pay Uncle Sam back — possibly with interest. The easiest way to tell if you’ve been issued a fraudulent tax refund, according to the IRS, is if more than one return has been filed using your Social Security number.
You should also double-check your wage and earning information to make sure they are accurate.
Unfortunately, if you try to e-file your tax return and it’s rejected because a fraudulent duplicate return has already been submitted, the IRS notes, you’ll still need to file via paper — in addition to completing the IRS’s identity theft affidavit. You should also file an identity theft claim with the Federal Trade Commission.
And what if the money already hit your bank account? You should immediately call your bank and instruct them to return the funds. You will also need to call the IRS to explain why the money is being returned — and your tax prep service, too, as it may have been the source of your leaked personal information. If the IRS sent you a paper check, you can simply write “VOID” on the back of the check and mail it with a brief explanation.
2. You get a scary phone call from a “tax official” who knows all about you
Filing your taxes is complicated and stressful. Some would even say deliberately so, citing the millions of dollars in lobbying spent by companies like TurboTax against measures that could make the process simpler. So when you get a phone call saying you underpaid, you might whip out your credit card to resolve the issue as quickly as possible — particularly if you’re new to the process and are already anxious about making a mistake.
Alas, the IRS has recently noted an uptick in fake collections calls, which are often aimed at recent immigrants, non-native English speakers or hearing-impaired victims relying on dictation or interpretation software, as this IRS video relay service clip warns.
In these calls, scammers may already know your personal information. They might also offer you their “name” or “IRS identification badge number” or alter the caller ID to make it look like the phone call is coming from the IRS.
If you or one of your family members receives a phone call like this, it’s an immediate red flag: The IRS will typically notify you of unresolved debts via direct mail several times before resorting to other forms of contact, and will always give you an opportunity to appeal whatever amount it says you owe.
Also, the IRS will never ask you to submit credit or debit information over the phone, purchase gift cards or initiate a wire transfer — and it won’t threaten to have you arrested.
3. The “IRS” sends you an email with official-looking letterhead
Let’s say you get an email from the IRS. You’ve read about phishing scams before, and you already turned in your forms — but you check the sender and the email really does appear to come from the IRS itself. You think there’s no harm in double-checking the attached file to make sure there’s nothing amiss?
Unfortunately, simply clicking links or downloading any attachment from an unknown sender can potentially expose you to malware that can then jeopardize your personal information. The IRS has also pointed to a number of phishing emails specifically designed to do this.
Typically, these emails will be doctored with official graphics that make them look like they’re coming from the IRS or another other government agency. According to an IRS consumer alert, these emails usually contain some variation of the phrase, “You are to update your IRS e-file immediately.” Victims have also reported receiving similar queries through text messages.
To protect yourself from phishing emails, avoid opening communications from contacts you don’t know and maintain two-factor authentication and strong passwords when you can. If you do open a scammy-seeming email by accident, be sure to forward it, unchanged, to email@example.com.
Finally: The best way to beat tax refund fraud? Submit your return as soon as you can — which, depending on your income, you can likely do for free. Then, if anything dodgy happens, contact the government directly, like the Treasury Inspector General for Tax Administration at 800-366-4484, before you do anything else. For more help, check out the IRS’s guide to reporting fraud.
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