By Mark Buescher, C.P.A.
Tax filing season is finally over and our office lights on Range Avenue here in Madison are no longer shining until late at night. But as the dust settles, a concern among taxpayers seems to be growing more and more each year. That concern is identity theft.
Consumers should protect themselves against online identity theft and other scams that increase during—and after—the filing season. Such scams may appropriate the name, logo, or other appurtenances of the IRS or U.S. Department of the Treasury to mislead taxpayers into believing the communication is legitimate. In fact, right here in Madison County, I know through various sources of at least eight taxpayers this year who have had fraudulent tax returns filed on their behalf.
The Internal Revenue Service receives thousands of reports each year from taxpayers who receive suspicious emails, phone calls, faxes or notices claiming to be from the IRS. Many of these scams fraudulently use the IRS name or logo as a lure to make the communication appear more authentic and enticing. The goal of these scams is to trick you into revealing your personal and financial information. The scammers can then use your information – like your Social Security number, bank account or credit card numbers – to commit identity theft or steal your money.
Generally, the IRS does not send unsolicited e-mails to taxpayers. Further, the IRS does not discuss tax account information with taxpayers via e-mail or use e-mail to solicit sensitive financial and personal information from taxpayers. The IRS does not request financial account security information, such as passwords and PIN numbers, from taxpayers.
Most scams impersonating the IRS are identity theft schemes. In this type of scam, the scammer poses as a legitimate institution to trick consumers into revealing personal and financial information – such as passwords and Social Security, PIN, bank account and credit card numbers – that can be used to gain access to their bank, credit card, or other financial accounts.
Attempted identity theft scams that take place via e-mail are known as phishing. Other scams may try to persuade a victim to advance sums of money in the hope of realizing a larger gain. These are known as advance fee scams.
Here is how an identity theft scam works. Typically, a consumer will receive an e-mail that claims to come from the IRS or Treasury Department. The message will contain an enticing or intimidating subject line, such as “Tax Refund,” “Inherited Funds,” or “IRS Notice.” Usually, the message will state that the recipient needs to provide the IRS with information to obtain the refund or avoid some penalty.
The message will instruct the consumer to open an attachment or click on a link in the e-mail. This may lead to an official-looking IRS Web site. The look-alike site will then contain a phony but genuine-looking online form or interactive application that requires personal and financial information, which the scammer then uses to commit identity theft.
Alternatively, the clicked link may secretly download malware to the consumer’s computer. Malware is malicious code that can take over the computer’s hard drive, giving the scammer remote access to the computer, or it could look for passwords and other information and send them to the scammer.
In reality, taxpayers do not need to complete a special form to obtain their federal tax refund. Refunds are triggered by the tax return they submitted to the IRS.
The contents of other IRS-impersonation scams vary but may claim that the recipient will be paid for participating in an online survey or is under investigation or audit. Some scam e-mails have referenced Recovery-related tax provisions, such as Making Work Pay, or solicited for charitable donations to victims of natural disasters. Taxpayers should beware of an e-mail scam that references underreported income and the recipient’s “tax statement,” since clicking on a link or opening an attachment is known to download malware onto the recipient’s computer.
Nevertheless, scams involving the IRS are on the rise and literally involve tens of thousands of taxpayers. Consumers who believe they are or may be victims of identity theft or other scams may visit the U.S. Federal Trade Commission website for guidance on what to do. The IRS is one of the sponsors of this site.
Mark Buescher, CPA is owner and principal of Buescher and Ruff, LLC, a local full service accounting firm in Madison, specializing in tax preparation and planning, business consulting and assurance services. Tax laws contain varying effective dates and numerous limitations and exemptions that cannot be summarized easily. For details and guidance for your specific situation, contact your tax advisor.