A letter from IRS Commissioner John Koskinen dated February 19 listed multiple potential scams that victimize American taxpayers. Each year, the IRS publishes a list of top tax scams, and this year, Koskinen indicated that “Taxpayers should be on the lookout for tax scams using the IRS name. There is an increase in these scams every year at tax time. Scams can be sophisticated and take many different forms. We urge people to protect themselves and use caution when viewing emails, receiving telephone calls or getting advice on tax issues.”
The top five tax scams this year are identity theft, phone fraud, fake websites, “free money” refunds and unscrupulous tax preparers.
1. Identity Theft – The identity thief generally acquires the victim’s name and Social Security number and is an early filer. He or she attempts to file a tax return with your identity and, in that way, gets a large refund. The IRS reported a 70% increase in identity theft tax fraud investigations in 2013. It has substantially increased its efforts to address potential identity theft and tax fraud. If you believe you have been a victim of identity theft, call the IRS Identity Protection Specialized Unit at (800)908-4490. You can get more information on identity theft on the IRS website.
2. Phone Fraud – A caller may claim to be from the IRS or state government. Typically, the caller will use common names and claim that you owe taxes. The caller will threaten to revoke your driver’s license or take other action if you do not immediately pay taxes to him or her. Often, the first caller hangs up and, shortly thereafter, a second caller claims to be a police officer or some other official, confirms the first message and then demands payment. The IRS has a protection line at (800)829-1040. If you think you have been called by a fraudulent person claiming to be from the government, you can also access the FTC website and use their Complaint Assistant.
3. Fake Email or Website – You may receive a fake e-mail with a link to a government website. The goal is to persuade you to click on the link and then enter personal information. Using that personal information, such as a Social Security Number or banking information, the scammer can then commit identity theft or financial theft. The computer term for this activity is phishing. Taxpayers need to understand that the IRS will never contact them by e-mail. Any unsolicited e-mail that you receive will not be from the IRS. Anyone who receives a phishing e-mail should forward it to firstname.lastname@example.org.
4. “Free Money” Refunds – Some scammers will try to entice victims with fliers, ads, store fronts and word of mouth by claiming that everyone can receive large refunds. They may use organizations such as community groups or church groups to promote their scam. Claiming that everyone should receive a substantial “free money” tax refund, the scammers prepare tax returns with inflated deductions and improper credits. The victim pays a substantial fee and files the improper return to claim the large refund. Unfortunately, IRS income levels affect various Social Security, veterans, low-income housing and other government benefits and some victims have experienced an interruption in their other government benefits because they improperly reported their income. Taxpayers should be on guard for tax preparers who charge large fees and do not provide a copy of the tax return.
5. Unscrupulous Tax Preparer – Though most tax preparers are honest, some regularly commit refund fraud. They either do not report the correct income or claim improper deductions or credits. The tax preparer is required to report his or her IRS Preparer Tax Identification Number (PTIN) on the tax return. If a tax preparer is improper or abusive, the taxpayer should file IRS Form 14157, Complaint: Tax Return Preparer, which can be downloaded on the IRS website.