Posts

Protect Yourself Against The New Tax Refund Scam

The IRS has reported that the number of potential victims impacted by a tax scam has increased from a few hundred to several thousand in just a few days. Putting a new twist on an old scam, criminals are taking taxpayer information, filing fraudulent returns, and depositing erroneous refunds into real taxpayers’ bank accounts. The criminals then contact the victim and use a variety of tactics to attempt to claim the refund.

The scam appears to have originated from tax preparers’ offices, where computers that have been infected with malware provided criminals with access to thousands of consumers’ return data.

“Speed is critical,” the agency said in its advisory. “If reported quickly, the IRS can take steps to block fraudulent returns in a preparer’s clients’ names.”

As tax preparers increase their security settings to protect client tax and financial files, it is important that consumers also protect themselves by knowing identity theft warning signs.

Top Indicators of Tax-Related Identity Theft
  • More than one tax return was filed using your Social Security Number 
  • IRS records indicate you received wages from an establishment at which you never worked
  • You owe additional tax, receive a refund offset notice, or have had collection actions taken against you for a year you did not file a tax return
If you become a victim and notice an erroneous deposit in your account, take the following steps:
  • Contact your tax preparer immediately.
  • Contact the Automated Clearing House (ACH) department of the bank/financial institution where the direct deposit was received and have them return the refund to the IRS.
  • Call the IRS toll-free at 800-829-1040 (individual) or 800-829-4933 (business) to explain why the direct deposit is being returned.
  • Be aware that interest may accrue on the erroneous refund.
  • Communicate with your financial institution and be prepared to close your account, since the information has been accessed by criminals.

You can also access the steps for returning your erroneous refund directly on the IRS website.

Remember: The IRS does not initiate contact with taxpayers by email, text, or social media, or phone calls to discuss your account. If you receive a message, be suspicious!

LBA Haynes Strand is dedicated to alerting the public on any scam or fraudulous attempt to steal identities or gain access to important financial information. If you are interested in automatically receiving updates such as this, please subscribe to our blog.

IRS Announces Top Tax Scams for 2017

The IRS has announced the completion of its annual “Dirty Dozen” list of tax scams. The annual list highlights various schemes that taxpayers might encounter throughout the year, and especially during tax-filing season. “Taxpayers need to guard against ploys to steal their personal information, scam them out of money or talk them into engaging in questionable behavior with their taxes,” the IRS said.

The “Dirty Dozen” scams the IRS highlighted in 2017 are as follows:

Phishing: Taxpayers are advised to be on guard against fake emails or websites looking to steal their personal information. Specifically, they are warned to avoid opening surprise emails or clicking on web links claiming to be from the IRS, as the IRS will never initiate contact with taxpayers via email about a bill or refund.

Phone Scams: Taxpayers are warned that aggressive and threatening phone calls from criminals impersonating IRS agents remain an ongoing danger. The IRS said it has seen a surge of these phone scams in recent years, as con artists threaten taxpayers with police arrest, deportation, and revocation of their driver’s license if they fail to pay a bogus tax bill.

Identity Theft: The IRS is advising taxpayers to watch out for identity theft, especially around tax time. Taxpayers are cautioned to always use security software with firewall and anti-virus protections, to make sure the security software is always turned on and can automatically update, to encrypt sensitive files such as tax records stored on the computer, and to use strong passwords.

Return Preparer Fraud: Taxpayers are cautioned to be on the lookout for unscrupulous return preparers, and to choose carefully when hiring an individual or firm to prepare a tax return.

Fake Charities: The IRS is warning taxpayers to be wary of groups masquerading as charitable organizations to attract donations from unsuspecting contributors, and especially of charities with names similar to familiar or nationally known organizations. Taxpayers should avoid giving out financial information to individuals soliciting for charity, and should check the status of charitable organizations using the IRS website.

Inflated Refund Claims: Taxpayers are cautioned to be on the lookout for individuals promising inflated refunds. In particular, taxpayers should be wary of anyone who asks them to sign a blank return, promises a big refund before looking at their records, or charges fees based on a percentage of the refund.

Excessive Claims for Business Credits: The IRS is warning taxpayers to avoid improperly claiming the fuel tax credit, pointing out that this tax benefit is generally not available to most taxpayers, as it is usually limited to off-highway business use. Taxpayers are also cautioned to avoid claiming the research credit unless they can demonstrate that they participated in qualified research activities or satisfy the requirements related to qualified research expenses.

Falsely Padding Deductions on Returns: Taxpayers are urged to resist the temptation to falsely inflate deductions or expenses on their returns. In particular, the IRS warned taxpayers against overstating deductions such as charitable contributions and business expenses, or improperly claiming credits such as the earned income tax credit or the child tax credit.

Falsifying Income to Claim Credits: The IRS is advising taxpayers to avoid inventing income to erroneously qualify for tax credits, such as the earned income tax credit. Taxpayers are warned that individuals are sometimes talked into falsifying their income by con artists. These scams can lead to taxpayers facing large bills to pay back taxes, interest, and penalties; and may even result in criminal prosecution.

Abusive Tax Shelters: Taxpayers are cautioned against using abusive tax structures to avoid paying taxes, and are advised to be on the lookout for individuals advertising tax shelters that sound too good to be true. The IRS emphasized that it is committed to stopping complex tax avoidance schemes and the individuals who create and sell them.

Frivolous Tax Arguments: Taxpayers are warned not to use frivolous tax arguments to avoid paying tax, as the penalty for filing a frivolous tax return is $5,000. The IRS noted that there are frivolous schemes that encourage taxpayers to make unreasonable and outlandish claims, even though such claims have been repeatedly thrown out of court.

Offshore Tax Avoidance: The IRS is cautioning taxpayers against trying to hide money and income offshore, pointing to a recent string of successful enforcement actions against offshore tax cheats and the financial organizations that help them. The IRS recommended that taxpayers with unreported funds in offshore accounts catch up on their filing and tax obligations through the Offshore Voluntary Disclosure Program.

*Content provided by MHM publications*