Avoiding Online Tax Scams

Category: Finance , Privacy

“The avoidance of taxes is the only intellectual pursuit that still carries any reward,” observed economist Milton Friedman many years ago. Today, we can add “tax scams” to that list. Just as Americans gear up for the tax season, so do fraudsters all over the world. Here are the biggest cons to watch out for in 2017...

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.

A new scam for 2017 may 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 security guru Brian 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.

To protect yourself against these unknown threats, there are two things you can do. First, file your tax return early, before any scammers do. 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 "Avoiding Online Tax Scams"

Posted by:

james lang
03 Feb 2017

just had a w-email scam i think?it said infringement notice and had an attachment. to my wife.seeing as the car is in my name just deleted it.thought attachment might have virus

Posted by:

03 Feb 2017

Exempt Bob.

Have a good day

Posted by:

03 Feb 2017

The sad part about protecting your social security number at the doctor's office is that if you are on Medicare, the number is right there on your Medicare id card, and you must use it to get service.

Posted by:

03 Feb 2017

I just had a turbo tax scam attempt. Received email from what appeared to be TT say they were missing some of my personal info and it could delay my refund. As it turned out I did use tt and I was getting a refund so I took the bait. I tried to log into tt from the web site not using the provided link on the email. I had a problem... got frustrated and went back to the email and clicked on the link my whole screen went RED, Danger Will Robinson Danger my avast alerted me and I got my butt out of there pronto. So ya the scammers are out in force

Posted by:

03 Feb 2017

Recently received the scammer phone call of IRS agent calling to demand money. The call was laughable, the caller had a very heavy accent, used strange phrasing, and had lots of noise in the background. When I laughed at him and asked if anyone actually fell for this he hung up. Maybe just a trainee scammer?
About Mat's comment on SS numbers on Medicare card - I made a copy of my card, blacked out the Medicare (aka social security number) and carry that in my wallet. When asked about it at the DR office I told them I didn't want the scanned image (with my number) stored in their system. I gave them my number to use in their billing system without them storing a scanned image. Not sure all DR. offices would be OK with this, but it's a start.

Posted by:

03 Feb 2017

Regarding Mat's comment earlier today (3 Feb) on Medicare's use of Social Security numbers, I wonder what would happen if a few thousand people wrote to their congressional reps and demanded that Medicare issue unique numbers. Or still better, demand that in light of such idiocy, it's time to abolish Medicare. Murder gets attention.
(Yes, I am on Medicare.)

Posted by:

04 Feb 2017

Hi folks, we've been hit by identity theft twice now and both times it was a nightmare. The first time it was an insurance company that I had a policy with and one of the employees gave out a bunch of SS #'s and they rang up a bunch of charges in New York, a place we've never been. The second time the bank (aka credit union) caught it before it got out of hand by asking us if we took out a new credit card. We now get an identity protection pin every time we file just for that reason. I'm a firm believer that the SS #'s should be kept secret like they were intended in the first place. No one but your employer should have access to them. I also believe that the penalty's for fraud are not stringent enough to deter such actions. Fraudsters should be put so far under the jail that sunlight has to be pumped to them and made to pay restitution to the victims. Maybe a big "C" branded on the forehead and each cheek for "criminal", now that would be a deterrent.... :p

Posted by:

06 Feb 2017

Good one, Guy. I really like your solution! Just keep tuned in to Ask Bob and you'll be OK. Fraud and crime in general has made a sham of Social Security Numbers. If a business requires it to do business, I take my business elsewhere!! Oh, and I follow Bob Rankin, of course. That's both protected my data and helped me become a whole lot more productive with it!! Thank you, Bob.

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