How Do You Protect Yourself from Tax Scams and Identity Theft?
Tax scammers, data breaches and identity theft are often in the headlines, but there is some good news – according to the IRS, fewer fraudulent returns are being filed.
Unfortunately, scammers are always devising ways to force you into a panic and part you from your money.
When news of the Equifax data breach broke, the one affecting 143 million Americans, realization dawned that personal identity information is up for grabs. This one is so serious, the Federal Trade Commission posted a blog on the incident with tips on what to do to protect yourself. And, Equifax, like the farmer closing the barn door after the horse is gone, is offering free security protection for everyone in the US.
Scammers Use Emails, Phone Calls and Text Messages
It pays to know what to look for when it comes to scams. Just recently, a client called in a panic, to find out what to do about a text message he received on his cell phone.
This text mimics language scammers use when they email and call people, demanding immediate payment by credit card for a late IRS tax payment or penalty.
These scams are designed to instill fear and cause panicked reactions so people willingly provide personal information that can be used to take their money and compromise their identities.
The IRS generally does not employ these tactics.
In December 2015, Congress enacted a law that requires the IRS to use private collection agencies for the collection of outstanding inactive tax receivables. They are CBE, ConServe, Performant and Pioneer.
The IRS does not initiate contact with taxpayers through text messages, email or social media requesting personal or financial information.
In addition, according to their website, “Employees of these collection agencies must follow provisions of the Fair Debt Collection Practices Act and should be courteous and respect taxpayer rights.” Further – “Private collection agencies will not ask for payment on a prepaid debit, iTunes or gift card. Taxpayers will be informed about electronic payment options for taxpayers on IRS.gov/Pay Your Tax Bill. Payment by check should be payable to the U.S. Treasury and sent directly to IRS, not the private collection agency.”
Even if you do owe taxes, penalties or both, the IRS will first send notices by mail. You would receive a number of these notices prior to anyone calling you. This means you should not receive any unexpected phone calls from someone saying they are with the IRS and demanding immediate payment.
The IRS set up a special hotline to make a complaint about a private collection agency or report misconduct by its employee, call the Treasury Inspector General for Tax Administration (TIGTA) hotline at 800-366-4484 or visit www.tigta.gov
In March of 2016, the IRS posted a notice about another kind of scam, where you receive a phone call from someone at the “IRS” claiming to have your tax return and they just need you to verify one or two points of information, like your Social Security number or a bank or credit card account number to complete processing the return.
Don’t believe it. The IRS still uses the US Mail to communicate when they need further information.
In an effort to raise visibility about protecting identity and to give taxpayers security information, the IRS established National Tax Security Awareness Week for the first time in 2016. This year it began on November 27. It is a joint effort involving state tax agencies along with the tax industry, culminating in the Security Summit, in advance of the 2018 tax-filing season.
If you have been a victim of tax fraud because someone filed a fraudulent return under your name, here is a quick podcast about how to get a copy of that return to dispute it.
If you are worried about on-line security, data breaches, or you are an employer who wants to avoid W-2 scams, the IRS has tips and advice on their website at https://www.irs.gov/privacy-disclosure/security-summit.
Download and Print Out Your IRS Tax Scam Prevention Cheat Sheet. Click Here Now.
We invite you to contact us if you have specific questions, or would simply like to talk with a tax professional. Call one of our staff today at Proactive Tax Solutions in Corte Madera at 415-924-6240.