Tax season is here and many of us are wondering about how to file correctly, what kind of refund we may be getting and whether we should hire accountant or go it our own with an online service. But there’s something else we must put top of mind: tax return fraud.
In 2017, the IRS reported that for the fiscal year of 2016 it launched 1117 general fraud investigations — a decrease from 1202 for 2015 and 1358 for 2014. It’s positive to see the numbers going down, but as Lydia C. Desnoyers, CPA, CFE tells NBC News BETTER, “Tax scams, unfortunately, are probably never going away. With every new measure taken by the IRS to prevent cases of fraud, there is a scheme to circumvent it.”
Here’s how to avoid falling prey to these insidious scams which are designed to see your refund land in a fraudster’s bank account rather than your own.
1. File ASAP
We may just be getting our tax documents together now, knowing that we have plenty of time to file (April 17 is the deadline), but there’s a pretty significant reason to file ASAP: to avoid fraud.
“Filing early lowers the chance that someone can get in front of you, which is essentially how fraudsters work,” says Rick Henderson, principal at Atlanta Financial Associates. “Because what they do is file a fake tax return on the chance that they’re doing so before you. The faster you file, the less chance someone can try to get ahead of you.”
Most ID theft happens via the trash.
2. Clear Your Email Inbox and Invest In A Shredder
All criminals really need to file a false tax return in your name is your legal name, date of birth and social security number. Think about all the people you may have emailed any pieces of this information to for perfectly appropriate reasons? It could be a W-9 form for an employer, a scanned photo of your passport to a travel agency, a form for a healthcare provider.
“Don't keep all that stuff in your email inbox,” says Henderson, adding that you should also shred any old physical documents containing this information. “Buy a paper shredder to securely dispose of old billing and account statements, as well as other financial documents you no longer need; most ID theft happens via the trash.”
3. The IRS Will Never Ever Call You, So Just Hang Up
Often scammers will call and say they’re from the IRS and that you owe money. They may sound totally professional with a fake IRS badge number, and even share some knowledge that seems like they really know you, addressing you by your name, and so on.
“I actually received a [tax scam call] myself a few weeks ago,” says Desnoyers. “It was a voice recording of someone claiming to be from the Criminal Investigation Department of the IRS and they were demanding that I call back to make a payment or the IRS will seize my property.”
Hang up; there is absolutely no way that the IRS would ever call or email you. Even if you’re being audited or have legit penalties, Henderson stresses that the IRS only communicates by physical mail.
Even if you’re being audited or have legit penalties, the IRS only communicates by physical mail.
4. If Your Bank or Credit Card Company Contacts You, Call Them Back On An Official Number
Con artists may also pose as a representative from your bank or credit card company, which can be trickier to catch because these are organizations that actually might call.
“Another scam to be careful for is the phishing scam whereby scammers send you an email pretending to be your bank asking you to verify your personal information. It’s usually accompanied by some kind of threat (e.g., your account will be closed) if you do not verify your information so people tend to fall for it.”
If you have questions or concerns with your bank or credit company, make the call yourself using their official customer service number. The bottom line, Henderson says: “Take no inbound requests.”
5. Do Not Sign A Blank Return
Have a friend of a friend who’s a master at doing taxes and says they can take care of it all if you just sign the return and hand it over? Don’t bite.
“Some social circles scammer will work in and become trusted in the circle and offer to for your taxes and just say sign here and I'll do it for you. Never sign it,” emphasizes Henderson.
6. Beware of Tax Pop-Up Shops
If you do hire someone to prepare your tax returns, make sure they’re legitimate.
“Unscrupulous tax return preparers is another risk,” says Desnoyers. “People should be wary of these ‘pop-up’ tax preparation shops that you only see during tax season. The IRS actually provides guidance on choosing a tax preparer.”
7. Opt For A Credit Monitoring Service For All-Year Protection
We may be paying more attention to identity fraud risks during tax season, but this is a year-round concern, perhaps even more so now in the wake of the Equifax data breach.
Henderson recommends popping for a credit monitoring service that checks your credit scores and reports regularly, and can alert you to any changes or updates. It’s best to invest in service that scans your reports through all three credit bureaus (Equifax, TransUnion and Experian) such as LifeLock, which though not personally a user, is a service Henderson recommends to clients. This is a pricier service, so consider using eBates if you’re buying online — you can get up to 40 percent cash back on your purchase. RetailMeNot also has some coupon codes you may want to try, while Groupon has some specials.
If you do end up the victim of tax return fraud, note that if you’re persistent you can get your money back.
“[If] a fraudulent return was filed, the valid taxpayer is still entitled to their refund,” says Henderson. “However, they will need to file the proper return using paper filing and also they would have to provide ID and proof that they are the valid filer, so there will be requirements for additional documentation and identification. The process may take up to 6 months to get any refund due in that situation.”