Tax Alert: How to Avoid Taxpayer ID Theft and Tax Scams

January 7, 2018

Chetan Dogra

Written by Chetan Dogra, CPA

The tax filing season is right around the corner, which means its prime-time for tax scammers. The IRS warns taxpayers to be aware of scams that could target your money or identity. The IRS says it has seen a surge in phone tax scams over the last few years. Since 2013 over 5000 victims have paid over 26 million dollars as a result of a tax scam. The phishing and malware scams are up by 400%.

Most scammers pretend to be from the IRS and demand immediate payment of tax debts under the threat of seizing everything under victim’s name including bank accounts, property, and travel access. The scammers further escalate the fear by threatening to arrest and action of criminal proceeding. The objective is to pressure the victim to pay over the phone immediately either by credit card or bank account.

Here is how to protect yourself from tax scams:

A phone call or an email would not be the first method of contact from the IRS about a tax collection problem. The IRS will never solicit personal information and hound you for money without sending you a written tax notice in the mail. So if you receive a call from someone who is pretending as IRS agent and asks you to verify your personal information and demands immediate payment against the tax debt, don’t trust the caller and disconnect the phone right-way. Hackers have been known to make a lookalike that they are calling from a government agency and use fake caller IDs.

Call the IRS directly if you receive a threatening email or phone call asking for personal information and money wire. Do not click on the links in emails from people you don’t know and never submit personal information through forms embedded in personal emails. 

Also be aware that the IRS never asks for credit or debit card numbers over the phone and sends unsolicited emails or calls to anyone threatening arrest, lawsuits or prison time.

Another pain-point for the taxpayers and the IRS is tax related identity theft.

According to the IRS, tax-related identity theft occurs when someone’s stolen Social Security number is used for filing a tax return claiming a fraudulent refund. Identity thieves are known for using stolen Social Security number to file a false return early in the year. The victims of identify theft are unaware that anything is wrong until they try filing a tax return and find out someone already filed a return with their Social Security number.

One way criminals steal Social Security number is by calling or emailing potential victims or, more recently by hacking into online systems of tax return preparers or other third parties.  

The takeaway

If anyone believes they’re the target of an ID theft scam, the IRS recommends reporting the incident to the Treasury Inspector General for Tax Administration at 1-800-366-4484 and contacting the Federal Trade Commission through the FTC Complaint Assistant link.  Forward emails you think come from scammers to phishing@irs.gov.

 Let’s talk

For a deeper discussion on how to avoid tax scams, please contact our office at 646.477.9369.

These tax tips have been prepared for informational purposes only and should not be relied on for tax, legal or accounting advice.

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