Weekly column in the Washington Times Communities by Laurie Edwards-Tate
Benjamin Franklin famously said, “Nothing is certain but death and taxes.” If he were alive in the 21stcentury, he would have added “… and scam artists.”
The Internal Revenue Service is dealing with an unprecedented upsurge in thefts of tax returns and outright tax scams. In 2011, the IRS says it stopped more than $1.4 billion in stolen refunds by identity thieves, and caught 260,000 illegal refunds involving identity theft. This is a huge jump from 2010, when it reported catching 49,000 fraudulent returns for a total of $247 million.
So the IRS and the Justice Department are cracking down nationwide on tax refund fraud involving identity theft, and warning taxpayers to take some simple precautions to protect themselves from become victimized. Senior citizens and small businesses are especially vulnerable, but no one is immune.
One particular scheme is rampant this tax season. The IRS says this is how it works: the con artist tells the taxpayer he or she can file for a tax refund based on the American Opportunity Tax Credit. This is an education credit. The scam artists falsely convinces the victim he or she can still file for the refund even if they went to school years before. They offer to help file, then get the taxpayer’s personal information, and file a bogus refund.
By the time the taxpayer and the IRS figure out what has happened, the thief has cashed the bogus refund and is long gone.
The IRS said it has already detected and stopped thousands of these fraudulent claims. But even if you’re an unwitting victim, if you allow someone to prepare a return in your name, you are legally responsible and on the hook to repay the IRS. Be sure to check out the credentials of anyone who prepares your tax return. It is best to use a certified public accountant or enrolled agent for maximum safety.
Other scams are more basic. Thieves who get their hands on your name, Social Security Number, and date of birth can file an electronic return under your identity. They just make up the return with any numbers they want, and forge any reporting documents they need. It sometimes takes well into the summer months for the IRS to get the legitimate tax paperwork from employers or other organizations to verify the figures on your return. By then, the crook has cashed the refund check or gotten a direct deposit into a bank account, or even had the refund loaded onto a debit card, from which cash can be withdrawn at an ATM. Then they disappear.
Meanwhile, you have no idea. Or if you are lucky, you try to file your return online but it won’t go through, and you unravel what has happened.
Sometimes the taxpayer wonders why he or she hasn’t gotten a refund check yet. The IRS hasn’t verified any of the paperwork so the process is still in progress. You might contact the IRS asking for the status of your check; the IRS may send a letter and say multiple returns have been filed in your name, asking which is the real one.
You are left with the task of proving who you are to get your refund. An even greater danger is if you receive federal disability payments (SSI) or social security. The Social Security Administration has the right to seize your tax return as evidence that you are working, and cut off your benefits. While you aren’t responsible for the missing refund, in the meantime this could create a serious hardship.
How can you protect yourself? The IRS offers these tips to all taxpayers. No matter your filing status, income, or age, you should take these precautions to avoid become a tax scam or identity theft victim:
- File your return as early as possible. Scammers do too, hoping to beat you to the punch and claim your refund.
- If filing electronically, be sure the computer you use is not on a public Wi-Fi network or a wireless system that could be tapped. You should be connected with an Ethernet cable. If you aren’t sure what this is, ask someone.
- Don’t leave your returns on your computer. Once you’ve filed, transfer the information to a flash drive or a CD.
- Make sure you protect your computer from viruses and spyware with updated protection. Run anti-spyware software regularly.
- Never click on links or attachments in emails from strangers. You could infect your computer with a type of software that steals your personal information. Be cautious even when clicking on links in email from friends. They may not know the “cute” video they sent hides data stealing software.
- Never provide ANY personal information, especially your Social Security Number or date of birth, to anyone who has contacted you by telephone, via email or text message. Only provide this information when you have made the contact and can verify the recipient. Legitimate organizations understand that you need to be cautious and should be able to assure you of safety. If you are in doubt, don’t give anything out.
- If you receive a phone call, fax or letter from someone claiming to be with the IRS, verify it by calling 1-800-829-1040.
- ANY unsolicited email from the IRS is FALSE. The IRS never contacts taxpayers by email.
- You should always get your refund within one month of filing it electronically. Ninety percent of all refunds are issued within 21 days. You can check its status at this IRS webpage.
- If you suspect tax-related identity theft, call the IRS at 1-800-908-4490.
- The IRS has a great deal of useful information about tax related identity theft and the latest scams on its website. Visit here to learn more.
No one likes paying taxes, but most of us want to do the right thing, pay what we legitimately owe and make sure it is safely received. By taking sensible precautions, and maintaining a healthy skepticism about sharing personal information with anyone, we can help stop tax-related identity theft.
Until next time, enjoy the ride in good health!
NOTE: Please be sure to consult a qualified tax professional for advice, assistance, and filing help; options include a certified public accountant (CPA) who specialized in preparing tax returns, or an enrolled agent (EA), who must pass certification and is the only professional licensed at the federal level. Consult the American Institute of CPAs or the National Association of Enrolled Agents for a referral. For simple returns, a nationwide commercial chain can also be sufficient.