As scamming tactics become more sophisticated even knowledgeable taxpayers can get scammed

With taxes on everyone’s mind this time of year, it’s not surprising that this is also a particularly busy time of year for tax scams. Some of the scam tactics that get covered in news stories aimed at the general public seem so obvious that it’s easy to get over-confident and overlook the more subtle tricks scammers use to get access to your personal info and financial resources.

Most folks that read alerts from accounting firms know enough about their taxes to understand that a phone-caller demanding an immediate payment via gift cards to resolve an outstanding tax liability is not from the IRS. But the fraudsters adapt so quickly that by the time the IRS can describe one scam they’ve already moved on to the next plan to rip off the unwary.

How to Distinguish Fraudulent Contacts from Official IRS Business

The best way to protect yourself is to focus less on the description of any individual ruse and more on the identifying details that can help you distinguish fraudulent contacts from official IRS business. Here’s a few tips for confirming that a communication comes from the IRS and not a tax scammer:

• Almost every IRS correspondence with a taxpayer starts with at least one snail-mail letter delivered by the U.S. Postal Service. If the first contact you get on an issue is by phone or e-mail, do not provide personal information or click on links until you take steps to independently verify the authenticity of the contact.

• Be suspicious of any purported IRS contact that doesn’t start with a letter. Some recent scams have started with seemingly friendly calls or e-mails from a less threatening division of the IRS like the Taxpayer Advocate Service. An unexpected call or e-mail suggesting that you are entitled to some kind of refund of which you weren’t aware should serve as a red flag.

• The last four digits of your Social Security number are easier for hackers to obtain than your full identity. Any unexpected IRS contact that claims to be official but includes only the last four digits of your tax i.d. number should be treated with suspicion.

• If scammers have already hacked your tax records and you aren’t aware, it’s possible that the first suspicious event you see will be a refund deposited to your bank account that you did not file for. If that happens, you need to act quickly before things go from bad to worse. The IRS has specific instructions on how to notify them and resolve the problem.

• When the IRS tells taxpayers that they owe money, the Service instructs them to make payments to the “United States Treasury.” Any instruction to pay an agency or individual other than the U.S. Treasury should be treated as suspicious and reported to the IRS via e-mail at phishing@irs.gov.

• According to the IRS, it does not:
  • Demand payment without an opportunity to question or appeal the amount the Service says you owe.
  • Call to demand immediate payment using a specific payment method like a debit card, gift card, or wire transfer.
  • Call about an unexpected refund.
  • Threaten to bring in local police, immigration officers, or other law-enforcement agencies. The IRS cannot revoke your driver’s license, business licenses, or immigration status.

How to Handle Scam Contacts

Your response to a potentially fraudulent IRS contact might vary depending on what you know about your current tax situation.

For example, if you get a call or e-mail purporting to be from the IRS and you think you might actually owe taxes or be due for a refund, consult with your tax advisor. If you don’t have an advisor, you can verify the authenticity of the contact by calling the IRS at 1-800-829-1040. That’s the main IRS info line and hold times can be significant. But the time you spend on hold could pale in comparison to the time you might spend resolving a theft of your tax information.

We also recommend that if you get a call or e-mail purporting to be from the IRS and you think it’s a fraud, end the contact immediately. If it’s a phone call, hang up. If it’s an e-mail, do not click any links. You can report suspected fraud attempts to phishing@irs.gov or to the Treasury Inspector General’s IRS Impersonation Scam Reporting web page.

• Most importantly:
  • Never provide personal information to someone who initiates a phone contact with you, and
  • Never click on links in e-mails that you weren’t expecting.

The key to protecting yourself from tax-related fraud is to remember that time is on your side. A contact that instructs you to act immediately should always be verified before you make any payment or share any sensitive information. The more urgent an unexpected tax claim is, the more serious and immediate the alleged consequences are, the more likely it is that you’re being targeted for fraud.

Don’t Forget to Protect Your Loved Ones from Tax Scammers, Too

Even if you stop 100% of the fraud attempts on your tax accounts, you can still have your life disrupted if a family member, especially a dependent, falls victim to a scam.

Elderly taxpayers on a fixed income might be easier for scammers to bully into an immediate payment over the phone, especially if their pension or retirement accounts are threatened. Your kids might pay off a fraudster without saying anything to you because they fear you’ll be angry with them for messing up their taxes. Take some time to talk to family members about protecting their tax information and communicating openly with you about tax issues.

For more information on this topic, check out the IRS web page focused on tax scams and consumer alerts, or contact a member of the Freed Maxick Tax Team at 716. 847.2651 or connect with us here.