March 2016Volume 62Number 3PDF icon PDF version (for best printing)

Tax scams hit home

My sister called and asked me for my advice. “Kathy, someone from the IRS called and left a message. They want me to call them back. I’m worried.” I replied with the same answer I have given clients who receive a similar call, “This is a fake phone call. The IRS doesn’t contact you by telephone, only through written correspondence.” The false calls are becoming more frequent. I even received a voice mail message on my cell phone from a Washington DC number claiming that he was an IRS officer and I was guilty of tax evasion. He told me not to disregard this message and I needed to call back right away before I was arrested. At least the gentleman concluded his message with a friendly wish to have a nice day.

The IRS warns that these con-artists sound very convincing. The callers want consumers to share their personal information, enabling the scammers to use the stolen identities to file fraudulent tax returns or compel taxpayers to wire money they do not owe. The callers claim to be employees of the IRS and use fake names and identification badge numbers. Victims are told to pay their balance due through a pre-loaded debit card or wire transfer. The callers can become hostile and insulting as they threaten to arrest or deport the victim.

On the IRS website there is a list of five tell-tale signs of a scam where scammers request information. Note that the IRS works differently from these scams, as follows:

1. The IRS will only ask for payment with a written, mailed bill. They will not ask for payment over the telephone.

2. In the written correspondence, the IRS will give you the opportunity to question or appeal the amount due.

3. The IRS does not require taxpayers to pay only by a prepaid debit card.

4. The IRS will not ask for credit or debit card numbers over the phone.

5. The IRS will not threaten to bring in law-enforcement groups to have you arrested for not paying the amount due.

In addition to not making phone calls, the IRS also does not use unsolicited emails, text messages or any social media to discuss the taxpayer’s personal tax issue.

If a taxpayer wants to contact the IRS to find out about their tax return, they should call the IRS at 1-800-829-1040. If a taxpayer has been contacted in one of these scams, they can report the incident to the Treasury Inspector General for Tax administration at 1-800-366-4484 or at the website, <www.tigta.gov>.

In addition to the telephone scams, there is also a rise in identity theft. Thieves file false tax returns under stolen social security numbers to claim and collect false refunds. They also use stolen Federal Employer Identification Numbers of businesses to create false Forms W-2 to further the fraud of stolen refunds. The IRS is aware of these issues and according to their website they are “working hard to prevent and detect identity theft as well as reduce the time to resolve these issues.”

The IRS has been sending out notices to notify taxpayers that there are issues with processing their tax return or that more information is needed to accurately process the return. The IRS is finding that multiple returns are filed under the same social security number and returns are filed with false W-2 withholding information to claim refunds. The IRS is holding the returns from further processing until the taxpayer contacts them.

Once it is determined that the social security number has been compromised, that taxpayer needs to do the following:

• Respond immediately to the IRS tax notice

• Complete IRS Form 14039, Identity Theft Affidavit

• File a report with law enforcement

• Report identity theft at www.ftc.gov

• Contact one of the three major credit bureaus (Equifax, Experian, TransUnion) to place a fraud alert on their credit records.

• Contact their financial institutions to see if any accounts have been breached.

The IRS will respond to the taxpayer by assigning an identification number (ITIN) that the taxpayer will then use to file his next tax return. This number will only be good for one tax year. The IRS will automatically reassign a new ITIN each year. This system is meant to prevent taxpayers from being victimized by identity thieves a second time after the IRS has closed their case.

The IRS is allocating more resources to the issues of the fraudulent calling schemes and identity theft. They understand that they need to revamp their fraud detection system to catch new schemes as they emerge. Meanwhile, the IRS suggests protecting yourself, as follows:

• Don’t carry your Social Security Card or any documents that contain your Social Security number (SSN) or Individual Taxpayer Identification Number (ITIN)

• Don’t freely give out your SSN or ITIN; only give it out when required

• Protect your financial information

• Check your credit report every 12 months

• Review your Social Security Administration earning statement annually

• Secure personal information in your home

• Protect your personal computer by using firewalls and anti-spam/virus software.

• Change your passwords on Internet accounts

• Don’t give out personal information over the phone, through the mail or Internet unless you have initiated the contact or you are sure you know who you are dealing with

Taxpayers need to be alert and take precautions.

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