The Internal Revenue Service (IRS) releases an annual list of the top 12 tax scams, aptly named the “Dirty Dozen.” Not surprisingly, tax identity theft topped the list. This doesn’t mean that the IRS is not aggressively addressing the issue. In 2012, for the first time the IRS implemented 12 different identity theft filters to screen for tax-related identity theft returns and have expanded that number to more than 80 in 2013.
The IRS Law Enforcement Assistance Program for identity theft expanded to all 50 states in 2013, helping law enforcement to gather tax return data they need in order to investigate and prosecute tax identity theft crimes. They’ve also reduced the amount of fraudulent refunds issued, increased criminal investigations and doubled the size of their identity theft task force. Despite these efforts tax identity theft remains a significant problem, making it the dirtiest of the Dirty Dozen tax scams this year. Without further ado, we will summarize the top 5 tax scams below and offer our own insight as well.
1. Identity Theft: Tax-related identity theft occurs when someone uses your Social Security Number and other identifying information to file a fraudulent return with the IRS usually claiming they are owed refunds. This can be very frustrating to victims because it often takes longer than six months in order to prove to the IRS you are in fact who you say you are, get your authentic return processed, and receive any owed refund. The best way to avoid tax-related identity theft is simply to file your tax return before a criminal has a chance to. This way, they will get the duplicate filing notice from the IRS instead of you.
2. Pervasive Telephone Scams: This is a relatively simple scam. Criminals will call a potential victim and pretend that they are IRS representatives. They will usually use scare tactics to force the potential victim to give up their personal information or to send money in order to pay taxes owed. An easy way to avoid this scam is to simply hang up and call back the IRS at a telephone number listed on their website. This way, you know you are talking to the IRS and can give them any required personal information.
3. Phishing: Phishing is the process by which a criminal will send a fake, but genuine looking email purportedly from the IRS to the victim or create a fake website that looks like a legitimate IRS related site. These are then used to get the target victim to divulge their personal information, making them think they are giving said information to an official IRS email or website. The IRS does not typically request any personal information over email, so alarm bells should go off as soon as you see such an email. As for fraudulent websites, remember that the URL for any IRS webpage always starts with www.irs.gov. If you come across any fraudulent email or website, immediately delete the email and exit the browser and run your anti-virus software.
4. False Promises of “Free Money” from Inflated Refunds: This scam is accomplished by criminals posing as experienced tax professionals promising exorbitantly large refunds. Instead of getting you that large refund you were hoping for, they will use your information to commit fraud in your name and potentially file fraudulent returns. Essentially, if it sounds too good to be true it probably is. When hiring a tax professional, always be very careful to ensure they have a good reputation and can be trusted with your personal information.
5. Return Preparer Fraud: Similar to the False Promises scam, this one actually involves real tax preparers. Despite the fact that they are actual tax professionals who don’t need to commit fraud in order to earn money, they will use your information to obtain fraudulent refunds in your name or commit other fraud using your personal information. This is another instance where you have to really vet your tax preparer and ensure that he or she will adequately protect your personal information.
"IRS Releases Dirty Dozen Tax Scams" was written by Sam Imandoust, Esq., CIPP, CIPA. He serves as a legal analyst for the Identity Theft Resource Center. We welcome you to post/reprint the above article, as written, giving credit to the author and linking back to the original posting.