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Tax Fraud: Coming to a Mailbox, Phone, or E-mail Inbox Near You

2/25/2008

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Better Business Bureau warns that every tax season scam artists come out to prey on unsuspecting consumers. Posing as the Internal Revenue Service (IRS) through mail, e-mail, or the telephone, identity thieves and many other types of fraudsters are on the prowl looking to get their hands on taxpayer’s personal information and into their bank accounts. 

Since January 2001, the Justice Department has sought and obtained injunctions against several hundred promoters of tax fraud schemes. Injunctions have stopped promoters from selling tax evasion schemes designed to steal consumer’s identities and defraud both taxpayers and the U.S. Department of Treasury through Internet and direct mail, over the phone, and at seminars. Tax-scam promoters have cost the U.S. Treasury an estimated $2.5 billion, and affected more than 500,000 consumers in the past seven years.

“Filing taxes can be a complicated and confusing process for many people and scammers who come out during tax season prey on consumer’s anxiety and trust,” said Steve Cox, BBB spokesperson. “Scammers are very adept at posing as the IRS – whether online, over the phone, or through the mail. Once they’ve gained a consumer’s trust, they quickly move on to fooling victims into giving out precious personal and financial information.”

Scams through e-mail
The majority of tax scams are perpetrated through e-mail phishing schemes and scammers use many different tactics to try to trick victims into thinking they’re being contacted by the IRS, credit card companies or financial institutions. E-mails often look official, for example using the IRS logo, and in many cases are addressed to the recipient by name.

Phishing e-mails usually tell the recipient that there’s an issue with their refund, that they are being audited or that there is a problem preventing their taxes from being processed. In most cases, the fraudulent e-mail will provide a hyperlink directing potential victims to a Web site set up by the scammers, where victims are asked for Social Security numbers, bank account information or credit card numbers. And in some cases these illicit sites are designed to automatically install viruses and malware on the victim’s computer or to steal personal information without the victim even knowing what has happened. 

Know the Red Flags: Many tax-related e-mail phishing scams are run by people and organizations operating outside the United States, and their e-mails are often rife with spelling and grammatical mistakes. Also, if the IRS has questions or concerns with a tax return, they typically contact the taxpayer by mail, not e-mail.

Scams over the phone
BBB is warning consumers about one particular ploy in which scammers pose as IRS representatives, saying they are calling to verify a taxpayer’s bank account number because the IRS has noticed that the individual has not cashed their tax refund check yet.

Know the Red Flags: The bottom line on this phone scam is that the IRS does not monitor whether or not taxpayers have cashed refund checks or not. And, like BBB advice for e-mail phishing scams, the IRS primarily communicates with taxpayers in writing through the U.S. Postal Service.

Scams through the mail
In a new twist aimed at non-U.S. residents subject to the U.S. tax code, the IRS is reporting that non-U.S. residents are receiving bogus IRS letters in the mail along with a fake Form W-8BEN for establishing appropriate tax withholding. Recipients are informed of the requirement to fill out the form and provide account numbers, pin numbers, their mother’s maiden name, and their passport number. 

Know the Red Flags: Whether U.S. citizens or non-U.S. residents, if consumers receive any IRS or tax-related forms in the mail, they should go online and verify the authenticity of forms on the IRS Web site, comparing online forms to those sent via mail. In the case of non-U.S. residents, the real Form W-8BEN does not ask for personal information.

Refund scams
With the approval of the 2008 economic stimulus package, consumers need to be on the lookout for refund check scams appearing in their mailboxes and e-mail inboxes, and by fraudulent phone pitches designed to separate consumers from their hard-earned refunds. While no specific tax refund scams have emerged yet in the 2008 tax season, BBB predicts it’s only a matter of time. 

In a variation of the age-old advance fee check scam, BBB is advising consumers that they could potentially receive what looks like a legitimate check from the IRS in the mail, but included will be directions to wire money back to the IRS or some other third party who is supposedly processing the check on behalf of the IRS in order to cover fees or taxes.

Know the Red Flags: Ultimately, consumers do not need to divulge any information beyond filing their tax returns, nor do they need to wire money for any purpose to receive their refund check. BBB is also advising taxpayers that they almost assuredly will be receiving telephone calls or spam e-mail trying to trick them into submitting personal information in order to receive their refund checks. These calls or e-mails will come from criminals posing as IRS officials or financial institution representatives – and consumers should verify the identity and legitimacy of the individual and organization before providing any information. 

For more trustworthy advice on tax season issues and other personal finance topics, and to take the new BBB Money Manager Quiz, visit www.bbb.org.

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