If your tax season is more about getting the highest tax refund possible and less about protecting yourself from fraud, you might want to rethink your priorities. Tax fraud is a real threat this year.
The IRS is currently on high alert and has started releasing its 2016 “Dirty Dozen” series, which details the top tax fraud scams consumers should watch for.
Here’s what the IRS has warned us about so far:
Return preparer fraud: This is one of the most common scams seen during tax season, according to the IRS. While there are many trustworthy tax preparers available for hire, watch out for individuals making promises of huge refunds in exchange for your personal details and tax-related information, which could be used to steal your identity.
Scammers may ask taxpayers to sign blank returns, be hard to get ahold of and not be able to present legitimate accounting credentials. Good preparers will ask to see lots of records and receipts, take their time with your return and ask you to review it before submission.
Phone scams: The IRS has seen a surge of criminals impersonating IRS agents and making aggressive collection calls to unassuming taxpayers. In January, the Treasury Inspector General for Tax Administration announced approximately 896,000 contacts have been reported since October 2013 and they’ve become aware of more than 5,000 victims who have collectively paid more than $26.5 million as a result of phone scams. Unsuspecting elderly folks are often common targets, according to the Greenville, South Carolina, police department, which dealt with a wave of such scams in December.
The calls can be scary, too, as fraudsters may threaten police arrest, deportation and even license revocation if you don’t make a payment immediately.
Phishing: Fraudsters will go to great lengths to get you to hand over sensitive information, such as a Social Security number, tax ID or even a credit card number. They’ll use carefully crafted (but fake) websites and emails to trick you into handing over your information voluntarily.
“Criminals are constantly looking for new ways to trick you out of your personal financial information so be extremely cautious about opening strange emails,” said IRS Commissioner John Koskinen. “The IRS won’t send you an email about a tax bill or refund out of the blue.”
Viewing websites or suspicious emails could even expose your computer or mobile device to malware, which could lead criminals to even more sensitive information stored on your device, such as bank account login details.
Thankfully, the IRS implemented some new safeguards this year to help make tax fraud harder to commit. The change most noticeable to consumers will be the new password requirements for private-sector tax software accounts, like TurboTax. The new standards require a minimum 8-digit password using a combination of letters, numbers and special characters. New security questions, lockout features and ways to verify email will also be used.
These password-related measures are intended to help stop fraudsters from taking over software accounts and filing fraudulent tax returns in someone else’s name.
A number of states have taken additional steps to prevent tax fraud, too. In addition to asking to see driver’s license numbers, four states—South Carolina, North Dakota, Illinois and Utah—aren’t issuing refunds until after March 1 to allow extra time to verify the legitimacy of income documents this year.
The increase in tax fraud has consumers rightfully concerned. According to a new survey from Experian, more consumers are worried about falling victim to tax fraud this year compared to the past two years.
Approximately 42 percent of consumers are worried about someone accessing their personal data through their tax return, compared to only 35 percent in 2014 and 38 percent in 2015. Plus, 28 percent of consumers said they’ve been a victim of tax fraud or know someone who has. Despite mounting concerns, Experian also learned that a majority of survey respondents aren’t planning to take IRS-recommended steps to protect themselves, such as checking credit reports or filing taxes online using a computer with current anti-virus software.
Don’t let your fraud worries become reality. Take preventive action by doing the following:
- File ASAP. The sooner you file your taxes, the less time an identity thief has to swoop in and file them using your credentials.
- Don’t file taxes online using public Wi-Fi. Just like you should avoid shopping or mobile banking using an unsecured network, don’t do your taxes online using a Wi-Fi network that isn’t password protected.
- Question all tax preparation tools — including people. Thoroughly research any paid preparer or tax-preparation software. Buy software yourself; don’t download files from a sketchy third-party website to save money. Ask potential tax preparers to explain how they file and what steps they take to protect their customers’ information. Doing a quick Google search to learn more about previous customer experiences wouldn’t hurt either.
- Don’t respond to emails or text messages from “the IRS.” If the IRS really does need to contact you, it will do so by mail and/or phone only. You’ll also never be asked to make a payment with a credit card over the phone.
Being cautious will protect your personal information from being stolen and help you avoid problems such as credit card fraud, identity theft and lost tax refunds. If for some reason you believe you’re a victim to tax fraud, contact the IRS and monitor your credit report for signs of fraud.
Happy tax season!