JimmyTalk: Don't be deceived by identity theft

Identity theft for tax fraud purposes and the flu virus have something in common: they both continually mutate, making prevention and protection measures ever-more challenging. Tax identity theft has a simple goal: get a refund by filing a false return in your name or your business’s name before you get your actual refund. 

Targets include individual taxpayers, employers and even tax professionals. The strategy is simple: trick, frighten, or browbeat people into giving up personal financial information from which false returns can be created or to have them send money to a fake account.

Businesses are becoming more attractive objectives. USA Today reports that through June 1 of the 2016 tax year:

Federal investigators identified roughly 10,000 business-related tax returns potentially involving refund fraud…The total marks a jump from approximately 4,000 during all of 2016 and 350 for 2015, the tax agency said.”

One defense is to file early to give thieves less time to send a falsified return with your name, employees’ names, or company information.

Additionally, it pays to be aware of their criminal practices, among them:

  • If you receive an e-mail, text, or other social media outreach that indicates contact from someone claiming to be from the IRS, it’s a fake. Always. Typically they’re seeking account information or demanding payment of a non-existent tax bill.
  • The IRS says a growing scam targets recent immigrants, threatening them with arrest or deportation if they don’t make immediate payments.
  • Phone scams come in multiple forms, with the callers using phony names and IRS identification; even Caller ID makes it appear to be coming from the IRS. The callers can sound quite professional: except, they’re lying.
  • The IRS won’t call until it has sent letters notifying you of a tax issue, after which you have rights of appeal. No IRS representative will call demanding immediate payment on threat of arrest or imprisonment.
  • To prevent Form W-2 fraud, for 2018 the IRS is working with certain payroll service providers to employ a 16-digit verification code on some 60 million W-2s. The code will appear in Box 9 on a W-2; if there’s no Box 9, or no verification code, your W-2 or that of your employee wasn’t selected to have a verification code.
  • If your personal or business taxes are prepared by a tax professional, ask what protections they have in place to safeguard your identity. Tax thieves are increasingly targeting tax preparers to obtain taxpayers’ information. For example, a tax preparer may get an official-looking e-mail from a tax software provider saying they’ve been locked out of their clients’ information because of “security problems.” A link to fix the non-existent problem accesses a fake website into which personal information is typed to “unlock” access. Except, it’s a fraud. Therefore, because of such situations, it can’t hurt to inquire what safeguards are used by your tax preparer.
  • Tax thieves are also mimicking communications that may look as if it’s coming from your tax preparer, asking for financial information to help prepare your return. However, it’s instead planting malware to steal your identity or sending you to a fake website to accomplish the same goal.
  • The IRS warns that phishing, e-mail, and malware schemes are proliferating. By clicking on the wrong thing you unknowingly can even enable criminals to track your computer keystrokes, with devastating effect, particularly when it’s happening to a human resources or payroll department.

Several years ago the IRS created a security summit to which government agencies, professional payroll organizations, tax preparers, and others meet to plot strategy against identity thieves. It has helped, but the criminals have all day, every day, to come up with new tactics.

The IRS has online resources to help fight fraud. Visit https://www.irs.gov/identity-theft-fraud-scams/identity-protection for the latest information.

Social Security numbers, employer identification numbers, tax identification numbers, preparer tax ID numbers, and other personal financial information are to tax criminals the key to Ft. Knox. Whatever it takes, hide the key.

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  The original article was published in the Knoxville News Sentinel. For more posts by Jimmy Rodefer, please visit the Rodefer Moss Blog.

Tagged Fraud, Identity Theft, IRS, IRS Scam, #JimmyTalk, Taxes