Protect Yourself from Identity Theft Tax Scams

Tax scammers leverage every means at their disposal to separate you from your cash – notices and offers in your mailbox or inbox, on websites or in person at your door. They may offer “tax services” that will steal your identity and your tax refund, lure you with offers of bigger write-offs, mock up websites and tax forms that look like the IRS site or forms to fool you into giving scammers your info and so on. And these are just a sampling of the generic scams.

Scam artists also prey on vulnerable groups like the elderly and low-income, by promising free money from fraudulent refunds, a scam the IRS says is rampant this year. In these scams, notices are posted on church bulletin boards and other places where elderly or low-income groups visit either in person or online.  Scammers make money from this trick in two ways – first, they collect a fee for helping to “file” for the refund on behalf of their victims, and then they steal their identity information for further exploitation. The victims are left without their fee or refund, and potentially in a position to have charges filed against them by the IRS.

There is more at risk than your money and identity. False claims and failure to submit your tax return get you into real trouble – including facing harsh fines and prison time – even when you acted in good faith and were scammed.

To stay safer this tax season, follow these six steps:

1. Secure your computer- if your computer is infected with malware, criminals can steal every piece of information you put on it.  Computer security is vital every day of the year, but especially critical before entering your most sensitive financial information.

   • You must have antivirus and antispyware software installed and up-to-date. If your computer isn’t protected from Trojans, viruses and other malware, your financial information, passwords and identity can be stolen. This concept is so basic, yet only 20 percent of the U.S. population adequately protects its computers. If the cost of security software is prohibitive, find a recommended free service online.

   • Secure your internet connection – Make sure your computer’s firewall is on. If you use a wireless network, it needs to be encrypted so someone who is lurking outside the house can’t collect your information. If you need a free firewall, look for a recommended one online. Never use a public WiFi service for any type of financial transaction or transfer of sensitive information.

   • Use added protection for sensitive financial information with passwords or store it on a flash drive, CD or external hard drive. For added protection all year, keep your finances inaccessible to anyone who uses (or hacks into) your computer. You can do this by password protecting individual files or folders on your computer, or choose to keep this information on a flash drive or CD that you keep in your safe or other secure location.

2. Drive, don’t be pulled to, tax websites– Chances are, the internet holds the answers to your tax questions. But safely searching for tax forms, advice on deductibles, tax preparers, etc. requires that you don’t get fooled into landing on malicious sites. Trust is key. Know the site. Know the user. Know the company.

   • Navigate to the websites yourself by conducting your own search. Always use a tool that helps you see the safety rating of the search results. There are many website safety rating services, and both Firefox and Internet Explorer offer tools as well.

   • Or, type in the URL of a trusted site. Just be careful that you don’t mistype the URL; criminals are quick to buy URLs that are just a common typo away from the legitimate sites, and can make their fake sites appear legit.

   • Never allow yourself to be pulled to a site by using a link sent in an email, or found on someone’s blog, or by clicking on an advertisement. The website you land on may look just like the real site (just as the ad may have looked like a legitimate ad) but it may be a well-crafted fake.

3. Don’t fall for email, web or social networking scams– tax time brings tax scams. Common scams tout tax rebates, offer great deals on tax preparation or offer a free tax calculator tool. If you did not solicit the information, it’s likely a scam.

   • If the email claims to be from the IRS, it’s a scam – the IRS will not contact you via email, text messaging or your social network, nor does it advertise on websites.

   • If the email appears to be from your employer, bank, broker, etc. claiming there is an issue with what they reported for you and you need to verify some information – it’s a scam.

   • If you feel any temptation whatsoever to believe an online notice, check it out BEFORE responding. Use a site like Snopes and type in the email’s subject to see if the scam has been reported. If it comes from a company, find the company’s contact information yourself and call. Do not use information contained in the email to check it out, since if it IS a scam, the information will be compromised.

4. Never send sensitive information in email unless that sensitive information is in a password-protected attachment (Word document, Excel file, etc.). Basic email is not secure; it can be trapped and read by criminals. While there are some email services that encrypt email, you will know if you have one of these.

   • Do not include the attachment’s password in the email – call and share the password over the phone.

5. Use strong passwords – A weak password is all it takes for someone to steal your information. “Password” or “123456″ are not secure options, and neither are names, birthdates, words found in dictionaries, etc. If you use the same password on multiple sites (or everywhere) you are asking for real trouble. Learn how to make strong passwords that aren’t hard to remember, just hard to guess.

6. Use a reputable tax preparer who follows strict data security guidelines. Even when you’ve secured information on your own computer, information can ‘leak’ from whomever you share your information with.

   • If you are using a new tax preparer, check him or her out with the Better Business Bureau or get references and check them carefully.

   • Ask about the data security precautions the tax preparer uses to protect your information – if their computers aren’t secure, your information isn’t either.

Of all the things you need to worry about during tax preparation, don’t make financial safety one of them. Your actions today can significantly decrease your chances of becoming the next statistic in the identity theft war.

Don’t let your guard down after you’ve filed! Tax scams turn into “refund scams” and “audit scams”

Scammers are persistent – they only way they make money is by stealing from the unsuspecting public. As soon as the IRS starts sending out refund checks, scammers will begin notifying potential victims of a problem with their refund. It may be a question about verifying your address, your bank routing number, or any other reason they think you might believe, but their goal is to get information to steal your identity, and perhaps your refund as well. 

Before sharing any information, take the time to validate that the message really is from the IRS. Expect any notice will be fake unless proven otherwise by first contacting the IRS. Find the email/fax/phone number yourself; do not use one given to you by the supposed IRS representative!

No matter how diligent you are with your tax return, no one wants to be audited by the IRS. This makes IRS audit scams particularly effective, and scammers use this to their advantage. Like refund scams, if you get notified that you’re going to be audited, this won’t come through email, a text message or on your social networking site. Even if you get an official-looking letter in the mail, don’t provide any information until you check with the IRS directly.

Remember, you know it’s a scam if:

• The “IRS” sends you an email. The IRS doesn't send unsolicited email to taxpayers.

• You get a text message or note on your social networking site from the “IRS.” They will never contact you this way.

• You see an offer from an unfamiliar for-profit tax service selling refund and credit schemes.

• You get internet offers for tax help directing you to call toll-free numbers… and they ask for your Social Security number.

• There is an offer of free money from the “IRS” (or Social Security) with no documentation required.

• You see a promise of refunds for “Low Income – No Documents Tax Returns.”

• You’re offered a way to make a claim for the expired Economic Recovery Credit Program or for economic stimulus payments.

• You get an offer for free tax preparation for a split of the refund.

• You get offers for help on your taxes from firms outside your immediate area.

If you believe your personal information has been stolen and used for tax purposes, contact the IRS Identity Protection Specialized Unit.

For advice on choosing a competent tax professional, see Tips for Choosing a Tax Return Preparer on IRS.gov.

Additional Resources:

• IRS - Tax Scam Warning