Tax Scams: What You Need to Know
April 30, 2013

Tax scams and those who perpetrate them have increased in recent years. Many unsuspecting individuals have fallen prey to scams designed to steal confidential information. Those who are informed about such schemes are less likely to become victims.

The most prominent fraud threats are explained below.

Identity Theft
Tax fraud involving stolen identities has become a growing problem. During 2012, the Internal Revenue Service (IRS) says it prevented nearly $20 billion in fraudulent refunds including those related to identity theft. This type of fraud is accomplished by criminals who steal personal information and then use that information to electronically file tax returns and claim tax refunds. Many times, an individual is unaware their identity has been stolen until their actual tax return is rejected by the IRS. Criminals usually target elderly residents and those who don't have an income tax filing requirement due to low income.

The IRS is implementing policies to better identify potential identity theft cases. These measures include: identity theft indicators, taxpayer notifications, locking personal tax accounts, and issuing personal identification numbers (PINs). The IRS has also developed a web page dedicated to identity protection

If you discover you have become a victim of identity theft the IRS recommends you:

  • Contact your financial institution
  • Contact the three credit bureaus (Equifax, Experian, & TransUnion)
  • File a police report
  • Contact the Federal Trade Commission
  • Call the specialized IRS Identity Protection Unit at 800-908-4490. You will need to send the IRS a copy of your police report or an IRS identity theft affidavit, Form 14039.

Phishing is the act of attempting to acquire confidential information by masquerading as a trustworthy entity in an electronic communication (e-mails, text messages, social media etc.). Many phishing campaigns pose as the IRS in an attempt to trick individuals into providing confidential financial information. The IRS advises that it will never contact taxpayers through email, text messages, or social media.

Some fraudsters will take advantage of individuals impacted by natural disasters by claiming that they work for the IRS and can help them claim a tax casualty loss. In reality, they use this as a way to steal personal and financial information.

Social Security
For many, Social Security benefits are a primary source of income. Fraudsters are aware of this and target these individuals by calling their homes and informing them their benefits will be cancelled unless certain financial information (usually a bank account number) is provided.

Tax fraud and information security is a very serious issue. Bucheri McCarty & Metz understands this and is committed to securing our client's information. We constantly monitor our controls to ensure information is secure both physically and electronically. Individuals should also be vigilant about securing their personal information. We recommend the following practices to help secure your personal information:

Keep Personal Information Secured Online

  • Ensure when entering personal information online, you do so using a secured browser. Look for the "lock" icon in the web address bar. Also, the web address should begin with "https:" The "s" indicates the page is secured.
  • Before disposing of a computer or mobile device, make sure all of your personal information is deleted.
  • Avoid opening unfamiliar e-mails
  • Do not access banking/financial web sites over a public Wi-Fi network.

Keep Personal Information Secured Offline

  • Keep all passwords secret
  • Be critical of who you give your social security number to. Ask questions like: Why do you need it? How will you use it? How will you protect it?
  • If in a public place, lock your computer when not using it.
  • Be cognizant of individuals requesting financial or personal information and ask questions.
  • Be sure to shred all documents that contain confidential information before throwing in the trash.