Episode 19: What to do with Tax Fraud?

LISTEN TO THE LATEST EPISODE NOW

It’s April, so spring is upon us and so is a often more unpleasant season – tax time. For many of us, the tax burden is behind us, but still, it’s always a stressful time gathering together all the records from the past year and making that annual filing to the Internal Revenue Service.  

In this episode, we are going to tackle and additional stress that’s come up when it comes to taxes and it doesn’t have anything to do with filing your own return.  Instead – tax returns have become ripe for fraudsters, and I want to let you know how these scammers are doing it and how you can protect yourself or respond, if it happens to you.

Unfortunately, I’m reporting on this one first-hand because yours truly had it happen to her this year, believe it or not.   These scammers are so pervasive and are costing our country billions of dollars each year.  The Justice Department has a new initiative because of the increase in fraud and its called the Stolen Identity Refund Fraud.  

I can report personally that it can happen to you because it happened to me.  I didn’t even know a return had been filed when I found out.  After I found out I had to take some very specific action to not only advise the IRS that it wasn’t me that filed the return and to protect my identify from further fraud.  

I’ve talked about scammers before and you might want to go back and listen in the two-part episode on scams,  As I have said these scammers are super sophisticated.  They are coming up with more and more clever ways to obtain our personal information.

Unfortunately, I was burned – and in a minute I’ll tell you more about that but I want to respond to the attack in this podcast by providing you with resources to avoid being a victim of IRS fraud and also take some additional steps to protect your personal information.

So – a few weeks ago I learned that I had been the target of fraudulent tax return scam.   How I found out was a surprise as well.  I got a letter in the mail from the IRS asking me if I had filed my returns.  Honestly, I have to tell you at first response – I thought that was a scam.  But turns out it was really the IRS.  And someone had really filed a return with my personal information asking for a big refund AND it caught the IRS’s attention.  That was a surprise too.  

So once the letter came in – I had to respond to the IRS on-line to advise them that I had not filed a return yet for 2023 and it did appear to be fraud.  I’m not the only one.  These tax scams are on the rise and they came in all shapes and sizes. 

Every year the IRS publishes what it calls its “Dirty Dozen” which is an annual list of top tax season scams.  New ones have been added to the list.

Go through the list here:

1.  Robocalls and other phony phone scams.  As I said I was surprised to get something from in the mail from the IRS.  I had to check it out to make sure it was legit.    So, know this as well the IRS will not call you on the phone and threaten you to pay back takes. That’s a big one now.  They also won’t call you personally to ask you for your bank account information to provide the refund to you.  They don’t offer that kind of personalized service. But people fall for it. Also know that the IRS cannot revoke your driver’s license, business license or immigration status – that is a red alert that you’re talking to a bogus scammer – Also they will not call you. What the IRS will do is mail you a notice and that can be checked out by you.
2.  Unfortunately, AI scams are on the rise now too.  They can record your voice that sound.
3. Texts or social media – the IRS will never respond in this manner.
4. Phishing emails where they are trying to solicit a response from you.

But more so than these scams – are identity thefts seeking fraudulent refunds and that’s what happened to me.    Imagine filing your return only to find out that its already been filed. More on that and what you can or should do if you find out that’s happened to you.

A far more serious form of tax-related crime is identity theft, where a scammer uses the victim’s personal information and Social Security number to file a return in the victim’s name—and claim the refund. One particularly painful aspect of identity theft and taxes is that victims often find out only after it occurs or when it’s well underway. For example: 

• You can’t file a return because a duplicate Social Security number has already filed one. 
• You receive correspondence from the IRS asking a question about a return that you did not file, that you owe additional tax, have had a refund offset, or that you have collections actions against you for a return you did not file. 
• You get a notice that an IRS online account has been created in your name, or that your existing account has been accessed or disabled by someone other than you. 

The IRS states that you should always respond to any IRS notice, particularly if you believe it is in error. If you’ve already contacted the IRS about an identity theft issue, you can reach them at 800-908-4490 for further assistance. 

Understand that if this form of identity theft occurs to you, it’s highly likely that the scammer has your Social Security number. Report that right away at https://www.ssa.gov/number-card/report-stolen-number if you think your number is being used by someone else.  

Actions: 

1. IRS MATTERS: If you are dealing with a fraudulent tax return, your situation will fall in one of the two categories below (a) or (b).

A. If you received an IRS 5071C Notice in the mail, that means the IRS has stopped the fraudulent return because its algorithm flagged the return for identity verification, which is good.  If this is the situation, then:

1. Contact the IRS to notify them that the return is fraudulent; 
2. Obtain an IRS IP Pin at Get An Identity Protection PIN | Internal Revenue Service (irs.gov)
3. Proceed with filing a paper return before the deadline to file tax returns.
4. NOTE:  It will not be necessary to complete the IRS Form 14039 Form if you received a 5071C Notice.

B. If you did not receive a IRS 5071C Notice and a fraudulent return was processed:

1. Contact the IRS Identity Theft hotline (800) 908-4490.  
2. Obtain an IRS IP Pin at Get An Identity Protection PIN | Internal Revenue Service (irs.gov)
3. Complete the IRS Form 14039 (Identity Theft Affidavit)
4. File your paper Income Tax Return and attach the Form 14039 to the Return.

2. CREDIT BUREAUS: Contact each of the three credit bureaus to place a fraud alert on your accounts.  The FTC indicates that once a fraud alert is placed on one of the bureau’s records, it will also be placed on the other two bureau’s records.  However, it would not hurt to call each to make sure the fraud alert is noted with each of the bureaus.  Their phone numbers are as follows:

1. Equifax: (800) 525-6285
2. Experian: (888) 397-3742
3. Transunion: (800) 680-7289

Lock your credit reports.  This is belt and suspenders with the fraud alert, but it does not hurt. Locking is different from “freezing”. Locking means your credit report will not be able to be accessed without your permission.  You may not wish to freeze credit as this may impact your ability to use credit cards. Please note that you will need to lock credit with each of the three major credit bureaus.

3. FEDERAL TRADE COMMISSION ACTIONS:  Visit the FTC’s website: www.identitytheft.gov and complete the questionnaire/identity theft report.  The FTC will give each person a live checklist of items to complete to protect their identity from further issues and will report the matter to the appropriate law enforcement agency.

4. SOCIAL SECURITY ADMINISTRATION: Attached is a SSN publication EN-05-10064, which contains some useful information.  

Six ways you can protect yourself from tax fraud 

1) File your tax return ASAP. 

One way to protect yourself from an identity thief from claiming a return in your name is to file yours before they do. As mentioned, many victims of identity theft find out they’ve been scammed when they receive an IRS notification that their tax claim has already been filed. Simply put, file early. 

2) Get an IRS PIN. 

Another way you can help prevent someone from filing a return in your name is to request a six-digit Identity Protection PIN (IP PIN). Once you receive am IP PIN, the IRS will use it to verify your identity when you file by paper or electronically. It’s good for one calendar year, and you can generate a new one each year for your account. You can request an IP PIN at: https://www.irs.gov/identity-theft-fraud-scams/get-an-identity-protection-pin.  

Also, be aware that scammers want your IP PIN as well. Phone calls, emails, or texts asking for it are scams. Outside of including it when filing your return, the IRS will never ask for it. If you are working with a tax professional, only provide it when it comes time to file. 

3) Monitor your credit and identity. 

Keeping tabs on your credit report and knowing if your personal information has been compromised in some way can help prevent tax fraud. Together, they can let you know if someone has stolen your identity or if you have personal info on the dark web that could lead to identity theft. 

Our credit monitoring service can keep an eye on changes to your credit score, report, and accounts with timely notifications and guidance so you can take action to tackle identity theft. 

Our identity monitoring service checks the dark web for your personal info, including email, government IDs, credit card and bank account info, and more—then provides alerts if your data is found on the dark web, an average of 10 months ahead of similar services.​ 

4) Get identity theft protection. 

If you fall victim to identity theft, having identity theft protection in place can provide significant relief, both financially and in terms of recovery. Our identity theft coverage & restoration support includes $1 million in funds if it’s determined that you’re a victim, which covers lawyer’s fees, travel expenses, and stolen funds reimbursement—while licensed recovery experts can help you repair your credit and identity. Considering the potential costs in both time and money, identity theft protection can speed and ease recovery. 

5) Remove your personal information from sketchy data broker sites. 

How’d that scammer get your phone number or email address anyway? Chances are, they pulled that information off a data broker site. Data brokers buy, collect, and sell detailed personal information, which they compile from several public and private sources, such as local, state, and federal records, plus third parties like supermarket shopper’s cards and mobile apps that share and sell user data. Moreover, they’ll sell it to anyone who pays for it, including people who’ll use that information for scams. 

You can help reduce those scam texts and calls by removing your information from those sites. Our Personal Data Cleanup scans some of the riskiest data broker sites and shows you which ones are selling your personal info. We also provide guidance on how you can remove your data from those sites and, with select plans, even manage the removal for you—while continuing to scan those sites in case your information reappears. 

6) Further protect yourself from online scams with online protection software. 

Comprehensive online protection software can help you on a number of counts. It warns you of suspicious links in emails and texts that could send you to malicious sites. It can further protect you from ransomware attacks, which IRS has also listed amongst its Dirty Dozen. And you can use it to monitor all your transactions across all your financial accounts in one place, which can spot any questionable activity. In all, tax time or otherwise, online protection software is always a strong security move. 

Stay Updated : A little stress and uncertainty can enter the picture during tax season, and scammers know it. In fact, they prey upon it. They concoct their scams around those feelings, hoping that you’ll take the bait and act quickly without taking the time to scrutinize what they’re saying and what they’re really asking you to do.  

Keeping up to date on what the latest scams are, having a good sense of which ones get recycled every year, and putting protections in place can help you avoid getting stung by a scam during tax season.  

Join the Boomer Time community! Learn more at ⁠⁠⁠NancyCogar.com⁠⁠⁠, subscribe to my newsletter and gain helpful resources to help you or your loved one navigate aging with confidence.