New Tax Scams Impact Individuals and Preparers

In a new wrinkle to an old scam, con artists are now targeting remote tax preparers to gain access to consumer information. As tax preparers work from home or remote locations because of COVID-19, the Internal Revenue Service (IRS) recommended tax professionals to review their required information security program to safeguard consumers against identity theft during National Tax Security Awareness Week in December. 

In 2021, 5.2 million tax refunds were flagged for fraud, a 50% increase since 2019. These rising numbers only increase the importance of staying aware of the latest scams — resources like the Federal Trade Commission’s Scam Alerts page can help keep consumers updated. The most common tax scam in recent years has been when a scammer steals personal information, like a W-2 or Social Security number, and files a fake tax return on the victim’s behalf. However, this year has also brought on the emergence of a new email scam, involving fraudsters who pose as the IRS in order to obtain information from tax professionals. 

How the Tax Scam Works 

Identity thieves are stealing client data from tax preparers through phishing schemes. This sensitive information reveals the exact refund amount that the clients have received, along with bank account numbers, income, dependents, Social Security numbers, and more. After a taxpayer’s refund is direct deposited into their account, these criminals attempt to steal it in one of two ways. 

In one scenario, scammers pose as IRS debt collectors and tell the taxpayer that the deposit was made in error. They then provide an account number for the victim to forfeit a portion of, or their entire refund. When taxpayers question the authenticity of the call, the fraudster will threaten to blacklist their Social Security number or bring criminal charges against the consumer for tax fraud. 

The other way this tax scam is being perpetrated is through automated calls to reach more potential victims while pretending to be from the IRS. The recording will also threaten taxpayers with the consequences of not paying up and provide a call-back number to return their refund. Between June 2020 and June 2021, roughly 59.3 million Americans lost money on phone scams alone, with an average loss per person of $502. 

Both of these tax scam approaches have been effective because they threaten consumers with tax fraud and legal action, and the scammers can prove they’re “real” by reading off the victim’s personal information and refund amounts. 

8 Ways to Stay Safe from Tax Identity Theft 

Tax scammers seem to get more creative each year, but it’s important for consumers to know that the IRS will never contact you via telephone or email. It’s equally important for tax preparers to step up their cybersecurity and identity theft protocols each year to combat these fraudsters from gaining access to their systems. 

1. Store your tax documents securely. Protecting your Social Security number and W2s is critical. You should receive these important tax documents during the month of January, either by mail or through digital access. If you do not receive an expected tax form, contact the organization supplying the form directly to ensure it has not been stolen from your mailbox. 
2. Never send sensitive information via email or text. IRS scammers will often mask themselves with emails or caller ID that looks legitimate. They reach out to you and request personal information that will allow them to file a tax return on your behalf. Do not be fooled — the IRS never contacts taxpayers by these methods of communication. 
3. Confirm any requests for information with a phone call. Although a notice in the mail may seem legitimate, it’s relatively easy for fraudsters to set up phony direct mail campaigns and victimize consumers. Always confirm any request by calling the IRS toll-free number: 800-829-1040. 
4. File your return as early as you can. Tax season is a race against the clock for identity thieves. By completing your tax return as soon as you have all your information in order, you stand a better chance of beating a fraudster to your return. 
5. Use a trusted tax preparer. If you decide to bring your taxes to a walk-in preparer, be sure to do your research and confirm they are qualified to handle your data. Illegal identity theft rings pop up in brick-and-mortar locations every year. Ask for a Preparer Tax Identification Number and don’t trust your information to anyone without verifying their CPA status. Be wary of preparers that recommend inflating your earnings or deductions. 
6. Request an Identity Protection PIN (IP PIN). Each year, 7% to 10% of Americans fall victim to identity theft. If you believe you may be one of them and have filed a report with the IRS, you may be eligible for an IP PIN. This will prevent criminals from filing taxes on your behalf. Residents in several states, such as Florida, California, and Maryland, can also request an IP PIN even if they are not a confirmed identity theft victim. 
7. If filing by mail, bring your return directly to the post office. Many taxpayers prefer to fill out their tax forms manually and file by mail. While this method is generally safe, it’s important to never mail the return from your home mailbox. It’s best to be as secure as possible, as mail tampering is still a major source of identity theft. Between 2017 and 2020, there was a 600% increase in reports of mail theft, rising from 25,000 to 177,000. 
8. Protect your personal identity. Invest in identity theft protection for you and your family as an extra layer of security. Identity restoration experts can assist you if you discover your identity has been compromised by criminals in an IRS tax fraud scam. 

Now is the time to begin your tax preparations and protect yourself, your friends, and your family from identity theft. By following these tips, you can help minimize your risk of becoming an identity theft victim due to tax fraud.