As it becomes increasingly common for our society to rely on online communication—whether it is by e-mail or social media such as Facebook and Twitter—a new breed of tax scams has arisen to commit fraud. These tax scams rely on the anonymity provided by the Internet to attempt to trick us. Such tax scams often have several things in common:
- They claim to be from an organization with legitimate power, such as the Internal Revenue Service (IRS)
- They indicate there is a dire issue you need to resolve within a set time frame or there will be serious consequences or loss for you
- To resolve the issue, you need to provide personal information you would not give out normally
But requests such as these are not legitimate but rather are an attempt at fraud in order to steal your money by scaring you into making a bad decision.
In the case of income tax scams, they may come in the form of an e-mail claiming to be from the IRS. In such an e-mail, the author may say that you have some form of tax issue, and you may face penalties or even jail time if you do not address is fast. Or perhaps the message will indicate you are owed a refund and you will lose it if you do not act quickly. In order to resolve the matter, you need to reply or click on a provided link to give personal information such as your Social Security Number, bank account number, credit card information, and passwords or other information associated with these accounts.
Once the bad guys have your personal information, they will use it to:
- Steal money you already have by draining your bank accounts or putting bogus charges on your credit cards
- Use your personal information to open new credit card accounts or obtain loans to buy cars or other luxury items
- File a fraudulent tax return and collect the refund
Since the bad guys are using your personal information to open these new accounts, you are the one who will receive the bills and your credit will be impacted by these fraud schemes when you fail to pay.
But there are ways you can protect yourself from these types of fraud. Here are a few of the steps you can take.
- Do not provide your personal information unless you initiate the contact with the IRS. Because of the prevalence of scams, legitimate organizations generally do not request your personal information.
- If you are unsure if communication from the IRS is legitimate, contact the IRS to ask.
- Do not use contact information or links provided to you in suspicious messages. Look up the contact information for the IRS on the IRS’s web site. Links in such messages will not take you to the IRS’s web site but rather to a site that will attempt to place unauthorized software you on your computer that can steal your personal information.
- Monitor your bank account and credit card statements for unauthorized activity.
- Sign up for a credit monitoring service, so that if your credit is used to open up an account, you will be notified automatically.
Do not become a victim of fraud. Exercise the steps above, and if you are still unsure if a message you receive is legitimate or not, speak with a tax attorney.
- Dirty Dozen Tax Scams for 2010 (turbotax.intuit.com)
- Avoiding Identity Theft from Phishing Scams (turbotax.intuit.com)
- Don’t Be Fooled By IRS Phishing Scams (forbes.com)
Mark has been a contributor to legal web sites related to bankruptcy, tax, and criminal law since 2011. He has an Accounting degree from Texas A&M University.