Learn about a few of the most common tax scams in Canada, watch out for red flags, and know how to protect yourself.
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Tax scams are some of the most persistent cons out there. They reappear each tax season with a slightly different spin. The most common tax scam involves someone posing as the Canada Revenue Agency (CRA) or a CRA agent trying to trick you into paying money or sharing personal information.
With online filing opening in mid-February, Canadians are encouraged to file their tax returns electronically and as soon as possible. Filing online is the preferred method, as the CRA can produce your notice of assessment (NOA) and refund faster versus a paper return.
While filing taxes online is faster and more convenient, it also widens the net of opportunity for scam artists to target Canadians. Taxpayers are encouraged to watch for tax frauds that employ phishing, spoofing and imposter scam techniques. Beware fraudulent emails or text messages with malicious links, fake CRA websites or phone calls asking for personal information, and communications through non-traditional mediums such as text messages and direct messages on social media. Imposters go to great lengths to appear real. For example, they may provide a fake badge number and name, have their caller ID appear from Ottawa or a CRA unit, cloak emails to look like official websites and much more.
Common signs of a tax scam
CRA impersonation calls
While Canadians are now much better at identifying and avoiding CRA scam phone calls, they continue to persist and are unlikely to go away. Some reports share that these scam calls are tireless and menacing, calling as often as five times per day from completely different local numbers. They’ll use spoofing, urgency and threats to push you into action before you have time to think, badgering personal information out of you and insisting payments be made by wire transfer, prepaid debit, credit cards, or even bitcoin and cryptocurrency. Reports to BBB Scam Tracker explain that the scam generally takes two primary forms:
The first type usually begins with a serious and official-sounding automated voice; a fake CRA agent will claim you owe back taxes and pressure you into paying a certain amount. They’ll also threaten that a warrant is out for your arrest, and you could face further fines if you do not comply.
In the second form of impersonation phone calls, scammers claim they are issuing tax refunds and ask you for personal information so they can send you a tax return. This information is ultimately used for identity theft. Scammers also use this approach to target college students by claiming a ‘federal student tax’ has not been paid.
See more information on impostor scams.
Tax identity theft scams
Another tax scam to watch out for is tax identity theft. This occurs when scammers use your Social Insurance Number to file a tax return in your name and collect your refund. It can also be someone using your information to get a job. Unfortunately, consumers generally do not realize they have been victims of tax identity theft until they get a written notice from the CRA saying that more than one tax return was filed or that records indicate they received income paid by an employer unknown to the victim.
In a BBB Scam Tracker report, a consumer explained how this almost happened to her, ‘I received an email from the CRA claiming that I am eligible for a $570 tax return. The window mentioned to claim the tax return was very short. I was asked to click the link in the email and fill out my credit card information to claim the return. The link looked a lot like a CRA webpage link, and there was even a CRA employee name and ID at the end of the email.’ This is a classic example of an online phishing tax scam.
9 tips to avoid tax scams
1. File your taxes as early as possible. File early before a scammer can use your information to file a fake return.
2. Only deal with trustworthy tax preparation services. For many people, significant life changes, business ownership, or simply a lack of knowledge about the ever-changing tax laws make finding a trustworthy tax preparer a good idea. That said, not all tax preparers have the same level of experience and training. Visit BBB.org to find tax preparers in your area and look for the BBB Seal – it’s The Sign of a Better BusinessSM!
3. Remember that the CRA does not initiate contact with taxpayers by email, text message or social media. CRA emails will never request personal or financial information, PIN numbers, passwords or similar access information for credit cards.
4. Review web links carefully. Ensure you access the actual CRA website when filing your taxes electronically or inquiring for additional information. Be extra discerning if you have been redirected to a website through another form of communications (for example, an email or text message).
5. Use unique and complex passwords. Always use unique passwords for your CRA and online banking accounts. Do not reuse the same password for different systems. You increase the risk of scammers gaining access if a data breach on another platform uses the same login details as your CRA account.
6. Create a PIN. Set up a personal identification number (PIN) once you log into My Account on the CRA website or call them and set it up with the help of a CRA call centre agent. This will help to confirm your identity for future calls with the CRA.
7. Sign up for email notifications from the CRA. This service notifies taxpayers by email if their address or direct deposit information has been changed on CRA records. These notifications can act as an early warning for potentially fraudulent activity.
8. When in doubt, contact the CRA to confirm. If you’re unsure whether you’re talking to the real CRA or a scammer, contact the CRA independently through their official channels of communication and ask. The CRA can tell you whether the inquiries and requests you receive are legitimate.
9. Act immediately if you have been scammed. If you are a victim in Canada, contact your local police service, the Canadian Anti-Fraud Centre and the BBB Scam Tracker to help warn others. If you believe your Canadian Social Insurance Number has been stolen, contact Service Canada at 1-800-206-7218. Also, report it to BBB Scam Tracker to help warn others.
