2019 Tax Fraud | Keep Your Personal Information Safe
As the IRS cracks down on tax refund fraud, scammers will be innovating new ways to scheme taxpayers out of their hard-earned money this year. This tax season no one is safe — individuals, businesses, and even tax preparers should be extra cautious with their personal and financial information.
As data breaches surge, the deluge of Personally Identifiable Information (PII) continues to flow into the hands of cybercriminals and malicious actors. Businesses maintain financial documents that include sensitive information fraudsters can use to impersonate the tax identity of employees and customers. One strike to an organization and the bad guys hit the jackpot!
Last tax season, the Internal Revenue Service (IRS) reported approximately $46 million claimed in fraudulent refunds and confirmed 2,204 falsified tax returns involving identity theft.
In response to the prevalence of tax fraud in recent years, the IRS has partnered with state tax agencies and the tax community — including tax preparation firms, software developers, payroll and tax financial product processors, tax professional organizations and financial institutions — to form the Security Summit. The goal of the Security Summit is to combat identity-theft-related tax refund fraud to protect the nation’s taxpayers. But there are only so many fraudulent claims the IRS can catch. Cybercriminals continue to devise new and significant threats to consumers and businesses daily. To prevent becoming a victim of the next wave of inventive identity theft tax fraud and avoid a delay in receiving your tax refund, stay cautious of these emerging scams:
When Phishing Evolves
Scammers are notorious for sending out phishing emails this time of year, hoping to capture W-2 forms from organizations. The Security Summit warns that fraudsters are sending emails to businesses and individuals impersonating the IRS and enticing them to review an attachment labelled “Tax Transcripts”. Upon opening the attachment, Emotet — a type of malware — is installed on your device and can spread throughout an entire organization. The malware captures all financial information present, which can be used to fraudulently file tax returns.
Let’s not forget, fraudsters still use the old school method of impersonating executives within organizations to trick employees. Their tactic begins with an innocent email asking a payroll or Human Resource official for a favor and ends with employees’ W-2s being sent to a criminal. It is important to educate employees on how to detect phishing emails, and to never download unexpected attachments or click on links without verifying them first.
Evaluate Your Tax Professional
Year after year, warnings about dishonest tax return preparers make it to the IRS’s “Dirty Dozen” list of tax scams. With more than half of taxpayers using tax professionals to file their taxes every year, there is an increasing likelihood you may come across a less-than-honest return preparer. Beware of a tax professional promising a large tax refund. This is a warning sign they may be creating false expenses, deductions or credits, and may be an unscrupulous tax preparer.
Although the majority of tax professionals are legitimate, be sure to always ask for a Preparer Tax Identification Number — which is required by the IRS for all paid tax return preparers — and check their history with the Better Business Bureau or proper licensing authority. To protect yourself from potential identity theft, never give your tax documents, social security number, or other PII data to a preparer until you have verified their credibility. You don’t want a dishonest tax preparer to file your returns without your permission or to become subject to IRS penalties or jail time for the actions of a fraudulent tax professional.
Safeguard Your Identity Protection Pin
An Identity Protection Pin (IP PIN) is a six-digit code issued by the IRS used to verify a taxpayers’ identity when submitting a tax return. If you have been a victim of Tax Identity Theft or are a participant in the IRS IP PIN pilot program, the IRS will send you a CP01A Notice containing this IP PIN. The IRS will reject paper and e-filed tax returns if the IP PIN is incorrect or missing.
Protecting your pin is important. Do not share your IP PIN with anyone except for the verified tax preparer who is completing your return.
Criminals may attempt to request a new IP PIN if they have access to your PII or other sensitive information, including: mobile number, email address, social security number, filing status and address from a recent tax return, or a bank or credit card account number. Your IP PIN will renew every year, so watch for a new CP01A notice to arrive. If you lose your PIN, be sure to notify the IRS and request a new one right away.
Tips to Protect Yourself Against Tax Fraud
- File your income taxes early in the season. Stay ahead of cyber-criminals and lessen the opportunity for them to file a tax return using your personal information. If you have been issued an IP PIN, don’t forget to include it in your return!
- Never open a link or any attachment from a suspicious email. The IRS will contact you by regular mail if they need to; they never communicate via email or phone without first mailing a letter.
- Report any fraudulent activity to the IRS.
Stay vigilant this tax season, especially if you believe your information may have been compromised. The last thing you want is the IRS reporting that your taxes have already been filed, or worse — receiving a notice that you’re being charged with tax evasion.
Theresa Todman, Managing Partner/CEO of B&M Financial Management Services, LLC . Theresa works with small business owners and entrepreneurs to assist them with financial management and creating organized systems and procedures. She specializes in bookkeeping, accounting, QuickBooks solutions, small business tax issues and consulting.
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