During tax season, many folks are eagerly awaiting refund checks from the IRS. They're planning to spend the refunds on vacations, books for next semester, or extra loan payments. Others will use the money to build up emergency accounts or invest in their favorite companies.
Unfortunately, some folks who are standing by the mailbox or checking their online bank accounts are rip-off artists. They've stolen someone else's identity and used it to grab a refund that doesn't belong to them. The IRS is constantly launching investigations into tax-related identity theft in which crooks use stolen personal information to claim fraudulent refunds, a problem that shows no signs of abating. Following are two common schemes:
- The nationwide phone scam. Callers impersonate IRS agents and claim that victims owe taxes that must be paid by wire transfer or prepaid credit cards. Using fake names and IRS badge numbers, fraudsters may even cite a portion of the victim's social security number. If the victim balks at divulging personal information - bank account numbers, passwords, birth dates, or complete social security numbers - the scammer may threaten arrest, jail time, or driver's license revocation. A co-conspirator may even call back, claiming to represent the local police or auto licensing bureau.
- Unscrupulous tax preparers. While most tax preparers are conscientious and ethical, some use their position of trust to gain access to a taxpayer's confidential information. Be wary of tax preparers who charge fees based on the size of your refund, or ask that the refund be directed to a bank account outside of your control.
With sufficient confidential information, a crook can file a fake tax return and pocket the refund. By the time your legitimate return makes its way to the IRS, the thief may be long gone, having absconded with your money and moved on to another victim.
Protect yourself from tax-related identity theft by following these simple rules:
- Ask why they need it. When someone solicits your social security number or other confidential information, make sure there's a legitimate reason behind the request. Be aware that the IRS will not call to demand passwords, PINs, or financial account numbers.
- File early. Don't wait. Get your refund before a thief can steal it.