With each new tax season in the United States, the Internal Revenue Service, state tax agencies, and the tax industry warn tax professionals and taxpayers to watch out for tax fraud. One of the well-known cyber criminals’ tactics is sending emails while pretending to be possible clients. In case of a response, the scammers send a phishing link or an attachment containing such a link to trick the tax professionals into accidentally revealing sensitive information or downloading malware to gain the device’s control. However, this year a new scam involving erroneous tax refunds was discovered. According to the reports, it is even more difficult to sense something is wrong which is why a lot of taxpayers fell victims to it. In this article, we will explain how the new scam works in detail and also share a few tips what to do if cyber criminals obtained your data or are trying to scam you.
The first Internal Revenue Service statement reminding to be cautious during the new tax season showed up on January 9, 2018, and after just a bit more than a month, on February 13 a new report showed up to warn about a recently discovered scam. According to this report, the institution learned the cyber criminals were able to access more of tax practitioners’ computers, which means a lot of taxpayers’ sensitive information could have been stolen. Also, it was said that consequently “the number of potential taxpayer victims jumped from a few hundred to several thousand in just days.”
The specialists say the scam is not entirely new, but it is more like the cyber criminals “have a new twist on an old scam.” Apparently, their first task is to obtain potential victims’ sensitive data, such as details of his actual bank account, income information, credits, deductions, and so on. To do so, they are using old phishing techniques by sending fake requests to tax professionals via email, and so on. In case of success, they might gain access to the mentioned information on all of his clients. Afterward, the scammers use the information they obtained to file fraudulent tax returns. Once it is done the criminals should deposit erroneous tax refunds from the taxpayer’s real bank account.
Next, the scammers should contact the victims and introduce themselves as workers from the Internal Revenue Service or some other law enforcement institution. The reports say this should happen shortly after the erroneous tax refund was deposited. Naturally, the scammers should point out the so-called mistake and ask the victim to return the money to the institution they claim to represent. What makes it look convincing is the fact the money was sent from an actual bank account and the fact the scammers know a lot of sensitive data about the taxpayer they are trying to trick. Moreover, some victims may rush to do as they are told since in some cases the cyber criminals even threaten to blacklist their Social Security numbers, issue an arrest warrant, and so on. Such a message could appear during an automated call with a recorded scammer’s voice.
Luckily, there are things one can do to avoid being scammed. First of all, those who receive a direct erroneous refund should contact the Internal Revenue Service or the Automated Clearing House department of the financial institution where the refund was received and ask them to return it instead. As for erroneous funds in paper checks, taxpayers are advised to mark them as void or take it to the appropriate Internal Revenue Service. In case such a check was cashed the person should submit a personal check to the appropriate Internal Revenue Service institution or contact it and explain the situation. These are just short tips so you would know where to start if you come across such a scam. However, if you suspect you might be already a potential victim of the described tax fraud you should get more accurate information on what to do to avoid getting scammed by reading the Internal Revenue Service Scam Alert report and the Taxpayers Guide to Identity Theft (both of the articles are listed in the References section).
- Security Summit Partners Warn Tax Pros of Heightened Fraud Activity as Filing Season Approaches. The Internal Revenue Service.
- Scam Alert: IRS Urges Taxpayers to Watch Out for Erroneous Refunds; Beware of Fake Calls to Return Money to a Collection Agency. The Internal Revenue Service.
- Taxpayer Guide to Identity Theft. The Internal Revenue Service.
- Kelly Phillips Erb. IRS Issues Urgent Warning On New Tax Refund Scam – And It’s Not What You’d Expect. Forbes.