Avoid These Online Tax Scams

Category: Finance

Economist Milton Friedman once wrote: “The avoidance of taxes is the only intellectual pursuit that still carries any reward.” Today, we can add “tax scams” to that list of things to avoid. Just as Americans gear up for the tax season, so do fraudsters all over the world. Here are the biggest tax cons to watch out for...

Don't Fall For These IRS Tax Scams

With billions of tax refund dollars in motion, scammers flock to the U. S. like bears to a salmon spawning run. Every year, taxpayers lose millions of dollars and their identities by falling for time-tested and new scams.

IRS Impersonation Telephone Scams are sophisticated and aggressive ploys. In this NPR article, you can listen to critical segments of an hour-long scam call recorded by Pindrop Security, a fraud detection specialist. There’s a simple way to tell if a call from the IRS is fake: the IRS doesn’t call taxpayers out of the blue, it always sends a bill and notice of taxpayer rights via USPS first.

But scammers are skilled at inducing panic and making victims forget that. Then come demands that the IRS would never make, i. e., “Go to 7-11 and buy $2000 worth of gift cards…" That should throw a few red flags.

Tax scam alert

Your Social Security Number is all a fraudster needs to file a false tax return in your name, directing a refund to be deposited to the fraudster’s bank account. Guard that SSN jealously. If asked for it on a form, write “n/a” in the blank and cite ID theft as your reason if asked. I am finding that doctors and others who don’t have a legit need for SSNs are backing down on this demand. ID theft is a well-known and widely accepted reason to keep your SSN private as much as possible.

To the IRS’ credit, it’s managed to reduce reports of stolen identities by half in just the past year. The added security comes at the cost of additional wait times for refunds. But you would wait even longer to receive a refund that was stolen by a scammer.

Don't Get Caught By a Phisher

RELATED: See my article Ten Ways to Protect Yourself From Identity Theft. Step 1 is Get Your Free Credit Report Online. Find out if you've got all the other nine bases covered.

Phishing emails are another major tax fraud ploy. Again: the IRS always initiates contact with taxpayers via US Mail. The agency does no business at all via insecure email. Any email purporting to be from the IRS or its independent “collection agency” is a fake. Ignore it.

Phishing emails may be the first prong of a multi-prong attack, designed to collect personal information that can be used to bolster the credibility of a phone scam. Don’t lower your guard just because an email doesn’t ask for money.

Promises of big refunds are often used to appeal to greed. Greedy people do stupid things like signing blank tax forms and returning them to people they don’t know. These scams are usually promoted via flyers, direct mail, and even fake storefronts, but they can be worked via email or websites, too. No one can guarantee you any tax refund before they’ve seen your tax numbers; don’t fall for this con.

Security guru Brian Krebs warned last year about a tax scam that can be worked on you without any contact between you and the scammer. Batches of personal information traded on the “dark Web” now include files containing the W2 records of employers. According to Krebs, W2 data files are often obtained by impersonating a CEO or CFO who ostensibly needs a subordinate to email the file to him. Scammers are also hacking into the files of tax preparation and payroll services, some of which are one-horse shops with zero cyber-security policies.

Krebs also advises taxpayers to File Your Taxes Before Scammers Do It For You. As a result of the massive Equifax data breach in 2017, it's even easier for fraudsters to request phony tax refunds in the names of identity theft victims. If you file your tax return electronically and get a rejection, that's a red flag. Contact the IRS if you think you may have been a victim of tax return fraud.

To protect yourself against these unknown threats, there are two things you can do. First, file your tax return early. Second, apply for an Identity Protection PIN that will authenticate your identity to the IRS when you file electronically. No PIN, no refund. To get an IP PIN, you have to certify that you’re at risk of identity theft; but aren’t we all?

Have you ever been victimized in an identity theft or tax scam? How did you handle it? Your thoughts on this topic are welcome. Post your comment or question below...

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Most recent comments on "Avoid These Online Tax Scams"

Posted by:

06 Feb 2018

I love the comment "apply for an identity protection pin." Easier said than done. My accountant filed appropriate papers since I was a victim of the Equifax fiasco. I have now been told by the IRS that I can apply online but that I would not expect to receive the PIN for the 2017 filing year. It should arrive in December 2018 to be used for the 2018 filing year. And to complicate it, to use the online sign-up process, you have to have a valid smart phone to receive a text message but it cannot be a prepaid one. I have a Tracfone so it can't be used. I have to wait for something in the mail to complete the enrollment. This should not be so difficult in light of all the identity theft going on.

Posted by:

06 Feb 2018

"Guard that SSN jealously. If asked for it on a form, write “n/a” in the blank and cite ID theft as your reason if asked."

That is a problem for people on Medicare since your SSN is your ID for benefits.

The geniuses in the Goobermint say don't ever carry your SS card with you but if you have Medicare you need the card with you when you visit the doctor.

Simply brilliant.

Posted by:

Stuart Berg
06 Feb 2018

From the IRS at

Getting Your IP PIN

To get your IP PIN, you must be eligible as determined in Step 1 below. You’ll receive your IP PIN online once we verify your identity. We’ll send you a new IP PIN each December by postal mail.

1. Determine your eligibility...

You must get an IP PIN to file your current or prior year tax returns in 2017 if:

You lost the CP01A Notice we sent you with your new IP PIN, or
You didn't receive your new IP PIN and you had one before, or
We rejected your e-file return because your IP PIN was missing or incorrect

You may choose to get an IP PIN only if:

You received an IRS letter inviting you to 'opt-in' to get an IP PIN, or
You filed your federal tax return last year with an address in Florida, Georgia or the District of Columbia

Posted by:

07 Feb 2018

If you are due a refund always best to file as soon as possible. I filed as soon as I got my W2 and mortgage interest statement. Using TurboTax online made the process easy. Already received my refund.

Posted by:

07 Feb 2018

It has long annoyed me the IRS does not have a box to check, "Send Refund to same address as noted". That simple thing would solve some problems.

Posted by:

Mark H.
07 Feb 2018

Back in 2014 I received a letter from the IRS regarding a tax return filed using my name. The fraudster who did it wasn't from the U.S. Otherwise he would not have tried to file a return on Dec. 31, 2013. When I contacted the IRS, the agent and I had a good chuckle over it. I had to file a ID theft report and notify the credit bureaus. I didn't lose anything but the time it took to do the paperwork. Since then, I get an IP Pin every year.

Posted by:

07 Feb 2018

When you refuse to divulge your SocSec number, if you get pushback, tell them if they take your SocSec number, and your identity is stolen, they will be on the short list of suspects you file with the police.

Posted by:

Irwin R Shyster
09 Feb 2018

I urge everyone to submit paper 1040's instead of E-filing. Why? 80MM people E-file. If only half mailed in paper 1040's the IRS would be swamped processing all those forms and would not be able to harass, hound and in many cases destroy people's lives. Even if you think the federal income tax is legal (it's not), it's still waaaaaay to high. The Rev. War was fought because of a 1% tax. Wake up Sheeple. You are being sheared.

Posted by:

Donald Dunn
28 Feb 2018

As an 82 year old I went to the IRS web site and filed the EZ tax form, because it was supposed to be totally free. their web site indicated that in some circumstances I may be charged as much as $25.00. I thought that was odd for a 100% free e file. I was to receive $1,445. I received $1,320.20,
which means that it cost me $124.80to file. I called the phone number listed (855)275-3829, and they told me that because I had filed a 1099 and one other thing that cost(?) And she said because I didn't include a debit card or charge card there was another$69.00 fee. After hanging uo I realized that I had been scammed

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