In 2022, taxpayers reported nearly 8 million occurrences of fraudulent or suspicious tax-related activities.
Many of these activities peak during the first four months of the year, when taxpayers are often rushing to prepare and file their returns and may not be as vigilant in protecting themselves against tax-related scams as they should be.
Here are a few of the key tax-related scams you should be aware of.
Tax returns filed under your name
All anyone needs to create and file a phony tax return is your name, date of birth and Social Security number.
With this information, they can create a return with false income and deduction numbers that make it look like you’re owed a huge refund. They can then request that the refund be sent to an address that’s not yours.
When you file your real return, the IRS flags you for filing a false return, and you may have to go through a great deal of effort to prove your identity.
While there’s no foolproof way to guarantee the security of your personal information, the best way to protect your return is to establish an IRS Identity Protection PIN (IP PIN), which you can do at the IRS IP PIN web site. You can add this unique six-digit passcode to your return before you file. Keep in mind that an IP IPN you get this year is only valid for your 2022 federal tax return. Next year, you'll need to log back in and get a new IP PIN for your 2023 tax return.
The earlier you file, the greater the likelihood you’ll fend off any possible false filings.
Phony tax preparers
If you’ve never used a tax professional before, you may receive emails or phone calls from scammers claiming they work for “deeply discounted” tax preparation firms. They often set up legitimate-looking web sites with addresses and phone numbers (which later turn out to be fictional).
They typically offer to prepare and file your taxes for far less than legitimate accountants and tax preparers charge. If you fall for their offer, you not only end up giving them the confidential information they need to file fraudulent tax returns, but they can use that information to open credit cards and other accounts in your name.
Don’t be a victim. Verify the credentials of any tax professional you're considering hiring. All legitimate tax preparers will provide their IRS Preparer Tax Identification Number (PTIN) upon request. You can also look up or verify the PTIN of any tax professional at the IRS Directory of Federal Tax Preparers.
Scam emails, calls and texts
Among the most common tax-season scams are criminals who robo-call, text, or email you pretending to be official IRS representatives. Their messages may cover a variety of “situations” that demand your attention, such as:
- You filed your return incorrectly.
- You owe the IRS money and face steep penalties.
- You need to provide additional tax forms that contain your Social Security number.
- You’re entitled to an extra refund.
Email scammers usually provide a link you can use to “fix” the situation. Inevitably, that link ends up installing a virus, malware or ransomware on your computer or mobile device.
Phone-based scammers often ask or demand that you provide your Social Security number and other personal information to “verify” your tax return, or, in the case of an “extra refund,” to provide your bank account number and routing number.
The best way not to fall for these scams is to never respond to them. Hang up on calls and delete emails and texts.
Remember: The IRS will generally never call or email you to notify you of tax filing issues. They’ll always only send communications via snail mail.
The only time the IRS might call or visit you is if you haven’t filed your returns for many years or you haven’t responded to several letters they’ve sent you.
Should you receive such a call (or a visit) from an IRS agent, ask them to provide their name and federal government HSPD-12 identification number. If they show up at your door, ask them to show you their official HSPD-12 ID badge before you let them in.
How to confirm if you’ve been scammed
In some situations, you may not know that you’ve been scammed until the IRS notifies you that something is amiss. Here are some red flags that could indicate you’re a victim.
- Before you’ve filed your return, you receive a legitimate email notification from the IRS that you’ve successfully filed your return.
- When you file your return electronically, you receive an official IRS email notification claiming that you’ve already filed it. Or, if you filed it via snail mail, a similar letter from the IRS.
- You’re notified via email that someone has set up an IRS account under your name.
- You receive a tax transcript you never asked for.
- You receive W-2 or 1099 forms from companies you don’t recognize.
What do you if you’ve been scammed
What to do
A scammer has filed a return in your name.
You receive a call or email claiming you owe taxes.
You’ve sent money or provided bank or credit card information to a scammer.
You can also report any scam attempts to the IRS either by forwarding the scam email to firstname.lastname@example.org or forward phone numbers for calls or text messages to 202-552-1226 (make sure you include the scammer’s phone number).
And since scammers probably have your Social Security number and birthdate, you should also ask the three credit reporting agencies, Experian, Transunion, and Equifax, to freeze credit checks that occur when scammers try to open new credit cards in your name.
If you work with a tax professional, inform them immediately if you believe you've been scammed. They should be able to help you mitigate any of these situations.
Proactivity is your best defense against fraud activity
The faster you get your tax return in the hands of the IRS, the less likely a scammer will beat you to it.
Beyond this immediate action, it’s always important to remain vigilant whenever you receive any suspicious email, phone call, text that asks you to take action that could promise your data security or compromise your online identity.
This material has been provided for general informational purposes only and does not constitute either tax or legal advice. Although we go to great lengths to make sure our information is accurate and useful, we recommend you consult a tax preparer, professional tax advisor, or attorney to discuss any fraud mitigation issues.
This article was authored by Dan Flanagan and Jeffrey Briskin. Dan is a financial advisor and Partner located at Canby Financial Advisors, 161 Worcester Road, Framingham, MA 01701. He offers securities and advisory services as an Investment Adviser Representative of Commonwealth Financial Network®, Member FINRA/SIPC, a Registered Investment Adviser. He can be reached at 508.598.1082 or email@example.com Jeffrey Briskin is Director of Marketing at Canby Financial Advisors.
©2023 Canby Financial Advisors.