How to Avoid Being a Tax-Scam Victim

Four Tips to help you Prevent Tax Fraud

How to Avoid Being a Tax-Scam Victim
April 7, 2016

To paraphrase the old adage, there are only three absolutes in life: death, taxes, and the rise of tax scams in the early part of the year.

A major tax scam in 2015 involved phone calls by fictional IRS agents that demanded immediate payment for alleged tax debts, threatening lawsuits or even jail time to those who refused to comply. The more sophisticated version of this included spoofing a legitimate IRS phone number to fool caller-ID systems. The callers also had Social Security numbers and enough personal information to convince the taxpayer that the call was legitimate.

As of early March 366,000 complaints have been logged by the Inspector General's office, and approximately 3,000 people have been swindled out of $15.5 million so far through this particular scam.

Other scammers use a carrot instead of a stick. Another significant scam claimed that consumers had been awarded government grant for having been good taxpayers who regularly paid their taxes on time and in full. The scammer asked for their account information so that the funds could be direct-deposited. The use of the word "grant" apparently fooled more people into believing the scam.

According to the Government Accountability Office (GAO), the IRS managed to block approximately $22.5 billion in fraudulent tax claims in 2014, but estimates that other attempts succeeded to the tune of $3.1 billion. You can decrease your chances of being a success story for a scammer by taking a few proactive steps.

  • File Your Tax Return Early – If anyone has enough of your information to file a fraudulent tax return in your name, they will do it as soon as possible to claim your refund before you even realize you have been scammed. Beat them to the punch by filing your tax return as soon as you have the necessary documentation.

    There is very little downside to filing your taxes early. If you are due a refund, it is obviously in your best interests to receive it earlier, and if you owe you can still file early and arrange for payment to be made closer to April 15th.

  • Protect Personal Information – Take all reasonable precautions to guard your personal information through the use of strong passwords that are changed frequently, and keep your anti-virus software updated. Limit Wi-Fi applications that involve banking and other sensitive activities, and when you do use them make sure the Wi-Fi is secure. Secure your own router with a password if you have not done so already.

  • Ignore E-mail/Phone Calls – The IRS will contact you by regular mail regarding the vast majority of tax issues, and they will never ask you for personal information such as account numbers, PINs, Social Security numbers, or other identifiers over the phone or via e-mail. If you have some reason to think the IRS may need to contact you, make the initial contact yourself. You can check your credit score and read your credit report for free within minutes using Credit Manager by MoneyTips.

  • Check for Inaccurate Information – It is wise to check your credit report, credit card receipts, and other sensitive documents for any inaccurate information, false credit charges, or fraudulent attempts to open up an account. Even unsuccessful attempts to establish a fake account in your name suggests that at least some of your personal information is out there for the taking.

Take pre-emptive action during tax season and you are less likely to fall victim to one of these scams, and if you are not sure, contact the IRS yourself. The peace of mind will be worth any potential time on hold.

If you would like to monitor your credit to prevent identity theft and see your credit reports and scores, check out our credit monitoring service.

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