Tax season is in full swing — and that means scammers are on the prowl.
Tax scams typically ramp up early in the year when taxpayers start filing their returns to the IRS. (Tax season started Feb. 12.) They also flare up during times of crisis, like the Covid pandemic, according to the federal agency.
Con artists may be more active this year relative to past tax-filing windows, exacerbated by the season’s delayed start, experts said.
“It’s like the perfect storm we’re dealing with right now,” said Howard Silverstone, a forensic accountant and a member of the American Institute of Certified Public Accountants’ fraud task force.
More from Personal Finance:
What Trump tax returns may reveal following Supreme Court ruling
$15 minimum wage may boost Social Security benefits by $5,000 a year
It may be easier for some student loan borrowers to get PPP loans
Much of the fraud typically involves identity theft, according to tax experts. In such cases, a criminal might steal personal information to file a fake tax return and collect your refund.
Taxpayers may also unwittingly supply personal data to criminals who falsely claim they can help collect stimulus checks, according to the IRS. Congress is aiming to pass a $1.9 trillion Covid relief bill that includes $1,400 stimulus checks by mid-March.
“Thousands of people have lost millions of dollars and their personal information to tax scams,” according to the IRS.
More than 89,000 Americans filed a complaint with the Federal Trade Commission last year reporting tax fraud linked to identity theft, according to the consumer agency. Identity theft was the most reported type of fraud in 2020, the FTC said.
Tax identity theft
Criminals often reach out via telephone and e-mail to try ripping off unsuspecting victims.
In IRS imposter scams, for example, a con artist may pose as an IRS agent and try to intimidate callers into divulging sensitive information. Phishing scams aim to get data like account information and passwords through bogus websites, texts and emails.
However, the IRS won’t initiate contact taxpayers by email, text message or social media channels to request personal or financial information. The agency also won’t call to demand immediate payment — officials will generally first mail a bill to any taxpayer who owes taxes.
One surefire way to reduce the odds off fraud is by submitting tax returns as soon as possible.
“We’re in tax season now,” Silverstone said. “Don’t procrastinate.
“Once you file your tax return, you limit the opportunity for someone else to have stolen your identity and do it.”
What should victims do?
There are different steps tax-related identity theft victims should take, depending on whether the taxpayer reports the fraud (for example, if your e-filed return is rejected because of a duplicate filing) or the IRS flags a suspicious tax return with your name on it, according to the agency.
In the latter case, the IRS will mail a notice or letter (Letter 4883C or 6330C) asking to verify your identity. You may need to call a toll-free number provided and potentially visit an IRS Taxpayer Assistance Center.
If you report an incident, file a paper tax return. Complete an Identity Theft Affidavit (Form 14039) and attach it to the back of your paper return. The IRS may open a case and assign it to an identity-theft specialist.
Taxpayers will ultimately receive notification their case has been resolved, but it may take a while — generally within 120 days, but complex cases may take at least 180 days, according to the IRS.
Some victims will be placed into the Identity Protection PIN program and get a new six-digit PIN annually.
Consumers should also check with their state tax agency for additional steps at the state level.
They should also consider freezing their credit with the credit reporting companies (like Equifax, Experian and TransUnion). These can always be lifted, permanently or temporarily, later.
Source: Finance - cnbc.com
