Although tax filing season has been officially open only since Jan. 29, the Internal Revenue Service (IRS) is already warning that reports of refund scams are skyrocketing. Below is an overview of the most common type of scam and some tips to help you avoid becoming a victim.
Hackers steal current data from tax returns, which might include Social Security numbers and bank account information, via infected computer hardware. Using this stolen data, the cybercrooks file fraudulent claims on behalf of the victimized taxpayer. Refund payments are made to these innocent victims—often via direct deposit to their banking accounts. At this point, the scammers might pose as IRS agents and call the unwitting victims to demand return of the refunds. Sometimes the call is a recording accusing the taxpayer of fraud and threatening arrest and other scary consequences.
Red Flags and What to Do
|√ A refund check via direct deposit that you were not expecting.||Check with your tax professional to verify that the deposit is unexpected.
Contact your bank to discuss either changing your security information or closing that particular account.
|√ A check arrives in the mail for a refund you did not expect.||Contact your tax professional.
Return the check promptly to the regional center that sent it. Write “VOID” on the check and include a copy of IRS Form 14039 and attach a note to let the receiver know you have been a victim of a refund scam.
|√ Any type of phone call that is intimidating or threatening, or requires financial recompense from anyone claiming to represent the IRS. The IRS does not make phone calls like this to taxpayers.
|Unsure? Call the IRS on its toll-free numbers (800-829-1040 for individuals or 800-829-4933 for businesses) to verify before you take any action.|
|√ A suspiciously fast refund check. It normally takes at least 10 days for a refund check to arrive by direct deposit (the fastest mode of refund). The IRS noted that fraudulent refunds were showing up in bank accounts just days after the Jan. 29 start of tax season.||Send the check to the IRS, and tell them you believe this refund resulted from hijacked data and that you are a victim of a refund scam.|
Although the IRS has no explanation for how the thieves were able to get into the system within hours of the start of the filing season on Jan. 29, speculation has run rife. Some have wondered if the cybercrooks had inside help. The IRS emphatically denies that the problem originated within IRS systems or data. The hacking seems to have targeted businesses specifically created to prepare and file tax returns. Additionally, some think the recent major data breach at Equifax has placed millions of people at potentially greater risk of having their personal information stolen.
The IRS expects victims of refund scams to be proactive and return refunds promptly that were issued in response to a fraudulent claim. To add insult to injury, it may take up to four months before victims are able to get the legitimate refunds that are due to them.
Forewarned is forearmed. There are some things you can do to protect yourself. First, discuss this issue with your professional tax advisor. Plan to file as promptly as you are able to do so. Scammers count on being able to get their fraudulent filing to the IRS before the legitimate tax returns arrive.