By Teresa J. Leonard, QPA/QKA/ERPA, AIF® | Vice President Retirement Plan Services | 03.26.2018
Every year during tax season, we see new threats.
This year, with the increased number of data breaches reported by tax preparation companies, and with other cybersecurity warnings out, the IRS is warning of a new scam. The new scam involves erroneous refund checks and the use of technology to an extent that makes it difficult for victims to realize they’ve been defrauded.
How the New Tax Scam Works
There are three steps to this particular tax scam:
- Stolen Identity | The taxpayer’s information is stolen and the scammer files a fraudulent tax return that results in a refund.
- Refund Deposit | Because the fraudster has the taxpayer’s information, they can arrange to have the erroneous refund deposited directly into their bank account.
- Scammers Call, Asking for a Return of the Refund | Now that the money is in the account, a fraudster calls, claiming the funds were deposited in error, and asks you to send the money back, usually via wire transfer.
In one version of the scam, according to the IRS, the caller claims to be from a debt collection agency on behalf of the IRS. The IRS recently announced it will contract with third parties to collect debts, so even the most suspicious victims might find the story convincing.
Because the victim knows they didn’t file a tax return yet, and they see that the IRS deposited the money, they are susceptible to the scam. In some cases, fraudsters threaten criminal charges and warrants. Messages are also left, with a telephone number to call to rectify the situation.
Worried about what happens if they don’t give the IRS the money back, a victim “returns” the money following the instructions given by the scammers.
Later, when a victim actually files a tax return, they are told that a return has already been filed — and a refund issued.
Signs of a Tax Scam
The IRS is unlikely to call about a problem initially. In most cases, the IRS will send a letter through the U.S. postal service before attempting other means of contact. For anyone who’s suspicious, they can verify claims by calling the Treasury Inspector General for Tax Administration at 800.366.4484.
Other signs include IRS records that indicate wages or income from an employer not worked for, being told additional tax is owed for a year no return was filed, or if the IRS reports that more than one return has been filed for a Social Security number. Additionally, the IRS doesn’t ask for credit card numbers, so be wary of this happening.
The IRS Taxpayer Guide to Identity Theft has more information about what to look for, and how victims should proceed if they are scammed. The IRS requires a FORM 14039 in these cases.
The IRS also has a procedure for returning a deposit. Follow the detailed steps listed in Tax Topic Number 161 — Returning an Erroneous Refund.
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If you still have questions or concerns regarding this topic, reach out to our retirement plan team experts—we would be happy to help.