Tax season starts Monday, the first day the IRS is accepting electronic tax returns for 2016 — and opening day for the latest round of tax refund scams.
That’s when crooks file fraudulent returns to collect tax refunds under the identities of legitimate taxpayers — living or dead. All they need is your name, Social Security number, birth date and a computer. No W-2s or other tax documents are required to e-file; information such as claimed income, taxes paid and reported deductions is fabricated so Form 1040 and state returns indicate an entitled refund. It can be months before the IRS and other tax agencies receive actual tax documents and compare them to what’s reported in returns.
This scam, known as stolen identity refund fraud (SIRF), results in annual losses of more than $2 billion to the U.S. Treasury, according to the U.S. Justice Department. By comparison, the IRS impostor scam — the nation’s top ruse for the past three years (although down drastically in recent months) — has generated about $26 million for scammers since 2013.
Bogus returns (also filed to state agencies to get refunds) are usually e-filed early in the tax season, so the coming weeks are prime time for these schemes. E-filed returns get faster refunds; most are issued by the IRS within 21 days (although a new law this year will delay refunds for taxpayers claiming the Earned Income Tax Credit or the Additional Child Tax Credit). In comparison, refunds on mailed paper returns take six to eight weeks. Fraudsters using e-file hope to get refund checks or direct deposits to accounts they control before their spoofed taxpayers file legitimate returns.
Victims often learn they’d been had when their e-filed returns won’t go through, when an expected refund doesn’t arrive or when the IRS or state tax collector sends a letter saying that multiple returns have been submitted in their name. They eventually get their entitled refunds — taxpayers foot the bill for fraudulent ones — but it could take many months and plenty of hassles. Here’s what to know:
File ASAP. Especially if you expect a refund, it’s best to claim it before a scammer does, pretending to be you.
When e-filing, use a computer connected to the internet with an Ethernet cable (or ensure that your tax preparer does). Wireless computers are less safe; public Wi-Fi networks should never be used for tax work. Make sure antivirus protection is updated and that there’s a two-way firewall. After filing, transfer tax returns and paperwork to a flash drive, CD or other storage unit; don’t leave them on your computer, vulnerable to hackers.
Protect your personal information. Don’t carry your Social Security number or original Medicare card in your wallet. Provide your SSN or birth date only when required, and when you’re sure of whom you’re dealing with. If you receive a phone call, fax or letter from someone claiming to be with the IRS, verify it by calling 800-829-1040. Unsolicited emails and phone calls purporting to be from the IRS are really from scammers angling for sensitive information to file fake returns or conduct other types of identity theft.
Know the warning signs. If you don’t receive your IRS refund within a month of e-filing, check its status at https://www.irs.gov/refunds. If you suspect tax-related identity theft, call the IRS at 800-908-4490. You’re likely a victim if you receive a notice from the IRS or learn from your tax professional that more than one tax return for you was filed; you have an unexpected balance due, refund offset or collection action taken against you; IRS records indicate you received more wages than you actually earned; or state or federal benefits are being reduced or canceled because the agency received information reporting an income change.
If a duplicate return was submitted with your SSN, file a complaint with the Federal Trade Commission, complete IRS Form 14039 (Identity Theft Affidavit) and file a report with local police. If you haven’t already, place a security freeze on your credit report at each reporting bureau: Equifax (800-349-9960), Experian (888-397-3742) and TransUnion (888-909-8872). A fourth and lesser-known bureau, Innovis (800-540-2505), also allows for security freezes.
For information about other scams, sign up for the Fraud Watch Network. You’ll receive free email alerts with tips and resources to help you spot and avoid identity theft and fraud. Keep tabs on scams and law enforcement alerts in your area at our Scam-Tracking Map.
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