Insulating Against Tax Scams

When a judge asked a man why he perpetrated an internet scam the thief bluntly replied, “It is so much easier to rob someone with a computer and phone than to have to do it in person with a gun.”

Recognizing this, it is no surprise that online ploys are up 400% during the 2016 tax season alone. In the past 2 ½ years there have been upwards of 1 million contacts from fraudulent scam artists.

Already this year, one of our clients went to file their tax return only to find that someone had claimed a refund under her social security number while two other clients have received fraudulent phone calls, supposedly from the IRS, claiming they owed back taxes.

This is the world we live in and everyone needs to be on alert.

The fraudulent calls were automated messages claiming to be the Internal Revenue Service. The voicemail message was:

“Hello, this call is officially a final notice from IRS, Internal Revenue Service. The reason of this call is to inform you that IRS is filing lawsuit against you. To get more information about this case file, please call immediately our department number,” and proceeded to provide a phone number directly to the scammers—not the IRS.

As such, recognize that the IRS does not:

  • Call to demand immediate payment, or call about taxes owed without mailing a bill first
  • Demand payment without first giving the taxpayer an opportunity to question or appeal the amount said to be owed
  • Require a taxpayer to use a specific payment method for your taxes, such as a prepaid debit card
  • Ask for credit or debit card numbers over the phone
  • Threaten arrest for nonpayment

If you don’t owe taxes:

  • Do not give out any information—just hang up.
  • Contact the Treasury Inspector General for Tax Administration to report the call. Use their IRS Impersonation Scam Reporting web page or call 800-366-4484.
  • Report the incident to the Federal Trade Commission. Use the FTC Complaint Assistant on FTC.gov. Insert “IRS Telephone Scam” in the notes.

If you know you owe, or think you may owe, taxes call the IRS at 800-829-1040. This is the main phone for the IRS. Do not use a different number provided by the likely scammers.

If someone has fraudulently filed for a tax refund under your Social Security number you should

  1. File an identity theft report with the FTC online.
  2. File an identity theft report with the local police department. The reason for filing the police report and FTC report is to get the fees waived for placing the credit freezes.  Total fees for freezing with all three credit bureau’s is about $30 so if speed is of the essence then you might just do that first before filing the police report.
  3. Place a freeze on your credit report file with all three credit bureaus.
  1. File IRS Form 14039. https://www.irs.gov/pub/irs-pdf/f14039.pdf. When you complete this form, indicate that someone has stolen your identity which has impacted your tax account since they have filed a return using your identifying information. You’ll also provide information about the tax year affected and the last return you filed prior to the identity theft.
  2. Complete the instructions in the IRS letter called Letter 5071C when you get it.

Unfortunately, fraud and identity theft are not going away. If anything, we have merely seen the tip of the iceberg. Recognizing this, be smart with your information.

Do not give out your social security number, date of birth, mother’s maiden name or any other identifying information to someone who randomly contacts you. If you are contacted, determine how you can independently verify who they are and their authority.

Review your credit card statements religiously and immediately contest unfamiliar charges.

Pull your credit reports and close out inactive accounts.

Dave Sather is a Victoria certified financial planner and owner of Sather Financial Group. His column, Money Matters, publishes every other week.