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The Increasing Risk of Tax Fraud

April 7, 2015

Author: Austin Jarvis, Estate, Gift & Trust Tax Manager at LGT
 
Whether you’re just preparing your return or if you have already completed your return, you need to be alert of the various scams threatening tax payers. Don’t think you could be a victim of a tax related scam? Think again. In 2014 more than 330,000 individuals filed a tax identity theft complaint with the Federal Trade Commission (FTC, 2015).
 
“Everyone should be on the lookout for threatening calls from people faking IRS phone numbers and demands for immediate payment,” said IRS Commissioner John Koskinen. “I urge taxpayers to stay vigilant and remain aware of the constantly changing tactics used by these criminals (IRS, 2015).”
 
Phone calls and phishing emails are the top two ways scammers are trying to steal tax payers’ information and money this year. Unfortunately, there are a large number of victims who have fallen for these scams because they appear valid if you are unaware of the true process the IRS takes when seeking payment or information from individuals.
 
Scammers are using false logos, badge numbers, letterhead, phone numbers and other sophisticated methods to trick their victims into answering questions revealing personal identification numbers and credit card information. Although potentially anyone could be at risk, scammers are preying on individuals who are more likely to take immediate action, like the elderly and newly arrived immigrants (IRS, 2015).
 
As convincing as these criminals may be, the IRS has pointed out five tactics only a scammer will use (IRS, 2015):

  1. Demanding immediate payment over the phone. The IRS will never call to demand immediate payment. They will first send you a bill and a series of letters in the mail.
  2. Requesting you to pay taxes without giving you the opportunity to question or appeal the amount they say you owe. The IRS will allow you time to call and verify or question your bill.
  3. Only accept a particular method of payment, such as a prepaid debit card. These are harder to trace forms of payment to trace and allow them to quickly transfer the funds.
  4. Ask for credit or debit card numbers over the phone. The IRS has several secure ways for you to submit a payment and would never ask you for this information over the phone.
  5. Threaten to bring in local police or other law-enforcement groups to have you arrested for not paying.

 
In addition to these tactics, the IRS has identified the following “Dirty Dozen” scams being used in 2015 (IRS, 2015):

  1. Phone scams
  2. Phishing or fake emails
  3. Identity theft though a fraudulent tax return being filed in your name
  4. False tax return preparers
  5. Hiding income offshore
  6. Blank returns or inflated refunds
  7. Fake charities
  8. Hiding income with fake documents
  9. Abusive tax shelters
  10. Falsifying income to claim credits
  11. Excessive claims for fuel tax credits
  12. Frivolous tax arguments

 

If you suspect that you may be the victim of a scam, here’s what you should do (IRS, 2015):
• If you know you owe taxes or think you may owe, call the IRS at 1-800-829-1040 to begin making payments.
• If you know you don’t owe taxes or have no reason to believe that you do, report the incident to the Treasury Inspector General for Tax Administration at 1-800-366-4484 or online at the IRS Impersonation Scam Reporting Page.
• If you’ve been targeting by a scam, also contact the Federal Trade Commission and use their FTC Complaint Assistant.

 
Remember, the IRS will NOT use email, text messages or social media to discuss any personal tax issue (IRS, 2015). IRS Commissioner John Koskinen also points out that the agency does not hurry individuals to make a payment or to take action. There are a series of steps including letters, phone calls and the opportunity to appeal the request and ask questions.
 
Do not take immediate action when being prodded by what you may think is the IRS. Simply hang up and take a moment to look for the signs that you may be dealing with a scam artist.
 

For more information on tax scams, visit irs.gov or view our references.
FTC. (2015, January 26). Tax ID Theft Tops FTC Complaints in 2014; IRS Imposter Complaints Up More Than 2,300 Percent. Retrieved from https://www.ftc.gov/news-events/press-releases/2015/01/tax-id-theft-tops-ftc-complaints-2014-irs-imposter-complaints
IRS . (2015, March 31). Don’t be Fooled, Phone Scams Continue to Be Serious Threat Nationwide. Retrieved from http://www.irs.gov/uac/Newsroom/Don%E2%80%99t-be-Fooled-Phone-Scams-Continue-to-Be-Serious-Threat-Nationwide
IRS. (2015, February 9). IRS Completes the “Dirty Dozen” Tax Scams for 2015 . Retrieved from http://www.irs.gov/uac/Newsroom/IRS-Completes-the-Dirty-Dozen-Tax-Scams-for-2015

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