Advice on protecting yourself from tax scams this tax season
Tax scams are among the most stubborn cons out there. They reappear often, each time with a slightly different spin. The main theme is scammers posing as the Internal Revenue Service (IRS) in the U.S. or as the Canada Revenue Agency (CRA) in Canada, trying to trick people into either paying up or sharing personal information.
IRS or CRA Impersonation Scams
These scams most often start with a phone call and take two basic forms. In the first version, the IRS or CRA “agent” says you owe back taxes and pressures you into paying by prepaid debit card or wire transfer. If you don’t comply, the scammer threatens you with arrest and fines. In the other version, scammers claim they are issuing tax refunds and ask you for personal information so they can send your refund. This information can later be used for identity theft. Scammers also use this approach to target college students by claiming a “federal student tax” has not been paid.
These imposters often go to great lengths to appear real. The scammer may give a fake badge number and name. Your Caller ID may look like the call is coming from Washington, D.C. or Ottawa. Con artists sometimes follow up scam calls with an email, which uses the IRS logo, colors, and official-sounding language. In many instances, these scams start with a serious and official sounding “robocall” recording.
You are pressured to act quickly. Scammers typically try to push you into action before you have time to think. The IRS and CRA will give you the chance to ask questions or appeal what you owe. Also, their first contact with you will always be by mail, not phone or email. Payment must be made by wire transfer, prepaid debit card, or other nontraditional payment methods. These methods are largely untraceable and non-reversible. The IRS and CRA will never demand immediate payment, require a specific form of payment, or ask for credit card or debt card numbers over the phone. In the U.S., the IRS may call you about outstanding debts after reaching out by mail.
Tax Identity Theft Scams
Another tax scam to look out for is tax identity theft. This occurs when a scammer uses your government-issued identity number (Social Security number in the U.S. or Social Insurance number in Canada) to file a tax return in your name and collect your refund. It can also be someone using your information to get a job. Consumers don’t usually realize they have been victims of tax identity theft until they get a written notice from the IRS or CRA saying that more than one tax return was filed, or they were paid by an employer they don’t know.
Email Phishing Scams
The emails appear to be from the IRS and include a link to a bogus web site intended to mirror the official IRS web site. These emails contain the direction “you are to update your IRS e-file immediately.” The emails sometimes mention USA.gov and IRSgov (without a dot between “IRS” and “gov”) Don’t get scammed. These emails are not from the IRS.
Tips to Avoid Tax Scams
The best way to avoid tax identity theft is to file your taxes as early as possible. File before a scammer has the chance to use your information to file a fake return.
In the U.S., jot down your Identity Protection PIN (IP PIN) from the IRS before you file your return. This is a sixdigit number, which, in addition to your Social Security number, confirms your identity. It is important to note that you cannot opt-out once you get an IP PIN. So once you apply, you must provide the IP Pin each year when you file your federal tax returns. The IRS will provide your IP PIN online and then send you a new IP PIN each December by postal mail. Visit the IRS for more information about the program.
The IRS does not initiate contact with tax payers by email, text message or social media to request personal or financial information. This includes requests for PIN numbers, passwords or similar access information for credit cards, banks or other financial accounts.
Only deal with trustworthy tax preparation services. For many people, major life changes, business ownership, or simply a lack of knowledge about the ever-changing tax laws make finding a trustworthy tax preparer a good idea. That said, not all tax preparers have the same level of experience and training.
Check out websites carefully and make sure you are accessing the real IRS or CRA website when filing your taxes electronically or inquiring for additional information.
If you are the victim of tax identity theft in the U.S., contact the IRS at 1-800-908-4490. You should also file a complaint with the Federal Trade Commission (FTC) at ftc. gov/complaint or by calling 1-877-FTC-HELP. The FTC also offers a personalized identity theft recovery plan at identitytheft. gov.