How to Stay Ahead of Tax Scammers

Spring has sprung, which also means tax season has officially arrived. And, sure as April showers, tax season brings tax refund fraud season: identity thieves looking to file fraudulent returns and get your refund before you do. While the goal is always the same, tax fraudsters come up with new tactics to take your money every year. This year, because the IRS opened tax filing later than usual but also extended the filing deadline, thieves will have more time to steal refunds, so here’s what you need to know about preventing tax refund fraud in 2021.

This year, like every year, the best way to avoid refund fraud is to file your tax return as soon as you can. The IRS expects that refunds will arrive within about 3 weeks, as usual, so watch for yours and contact them if it doesn’t arrive.

Also, the IRS has made its Identity Protection PIN program available to everyone for the first time. It’s a voluntary program, so sign up for your PIN and use it when you file your taxes. The IRS also recommends filing electronically and using direct deposit for refunds.

Here are some of the most prevalent scams this year:

• Fraudulent filing using Electronic Filing Identification Numbers (EFINs): This is a scheme to steal taxpayer refunds using stolen credentials from tax preparers. The scammers are sending phishing emails to tax professionals impersonating the IRS and asking to “verify their EFIN before they begin e-filing.” If you have your taxes done by a professional, you can protect yourself by sending them this link to the IRS news release so they’re warned about the scam.
• Phishing scams: Taxpayers are continuing to receive emails or calls claiming to be from the IRS, the Taxpayer Advocacy Panel (TAP), or other government agencies and asking for personal and financial information. None of these organizations and agencies contact taxpayer directly for information. Don't answer these emails, and if you receive a call, hang up and report it to the IRS by emailing phishing@irs.gov.
• Stimulus-related scams: With a new round of economic stimulus payments coming out, there’s sure to be a new crop of stimulus-related scams like this one reported by the Taxpayer Advocacy Panel. Again, government agencies don’t call, email, or send text messages asking for your personal information. Stimulus checks are a powerful incentive to respond and scammers count on that, but don’t be fooled.
• "Ghost" tax preparers. As usual, the IRS is warning against dishonest "ghost" tax return preparers who may charge fees but never actually file clients' taxes or who falsify information in the return to qualify clients for huge refunds, then either charge high fees based on a percentage of the refund or redirect the refunds to their own bank accounts. Check references before choosing a tax preparer.
• Threats against your Social Security number (SSN): Another perennial scam, this one involves robocalls claiming to be from the IRS say that they will suspend or cancel your SSN if a supposed overdue tax bill isn't paid. Ignore them. The IRS will never call you directly, and your SSN can't be cancelled.

One other serious risk this year is being taxed for unemployment benefits you never received. With the pandemic and last spring’s stimulus package, identity thieves and scammers stole hundreds of millions of dollars-worth of unemployment benefits. Some of the fraud was discovered, but not all, so are now sending out 1099-G forms reporting those benefits as taxable income. The IRS also gets a copy of these forms, so if you get a 1099-G for unemployment benefits that you never requested or received, the IRS directs you to contact your state’s unemployment and/or revenue agency as soon as possible and request that they issue you a corrected form.

Filing taxes is stressful enough without having to play “tax fraud leapfrog,” trying to stay one step ahead of tax scammers. But like a spring cloud with a silver lining, getting a tax refund can be a fine consolation for the hassle of filing your tax return. So don’t let a tax scammer get the jump on you!