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Taxpayer Scam and Identity Theft





Taxpayer Identity Theft and Phone Scam

A nationwide scam targeting taxpayers continues to grow. In a new effort to take money from unsuspecting victims, fraudsters are sending out phony tax bills on what purports to be official IRS letterhead. They are also sending out e-mails from false websites that contain "IRS" in the Web address. In addition, scammers claiming to be IRS employees continue to call taxpayers, telling them they owe taxes and must pay up fast. Keep your guard up and don't fall victim to any of these scams.


The IRS has announced that the cyber attack on its tax system affected more taxpayers than first reported. This past May, the agency said that tax information on 100,000 or so filers was stolen when hackers used IRS's "Get Transcript" Web tool to gain access to taxpayer data. It now says that 220,000 additional folks may have been victimized by this breach. As before, the agency will notify the affected taxpayers, pay for credit monitoring and give victims the opportunity to apply for special identity protection ID numbers.




Anyone, regardless of whether they are required to file a tax return or not or whether they are a minor, an adult or even deceased, can be impacted by identity theft. According to the Federal Trade Commission, 2014 marked the fifth consecutive year that tax-related identity theft was the number one identity theft complaint filed by consumers.


Tax identity theft typically happens when someone uses a person's stolen identifying information to file a fraudulent tax return and obtain a refund. Telltale signs for individuals often include a return being rejected because a Social Security number already has been used or you have received an IRS notice or letter requesting you to verify your identity. If a return is rejected because someone else already filed with your Social Security number you will have to file a paper return for the current year.


Unfortunately, identity theft issues can take many months to correct. The IRS tells taxpayers their identity theft case will be resolved within 180 days; however, the average the IRS took is 278 days to resolve identity theft cases.



That's a lesson taxpayers learned after IRS reported a breach of it's tax system by sophisticated hackers. Tax information on 104,000 filers was stolen by scammers in the past few months. According to IRS, fraudsters attempted to steal data on 200,000 people.


Hackers used IRS's Get Transcript Web tool to gain unauthorized access to taxpayer information. Armed with Social Security numbers stolen elsewhere, they answered several personal verification questions to access filers' tax return transcripts. The transcripts contain extremely sensitive tax data, including the amounts that were entered on most of the lines on the 1040 and its accompanying forms, such as Schedule A.


The scammers took the stolen information and filed phony tax returns in the victims' names. They sent in 36,500 fake returns and up to 13,000 of these got past IRS's fraud detection system, totaling around $39 million in false refunds. 35,000 victims had already filed for 2014, so IRS would reject fake returns for them.


IRS has taken a number of steps to limit the damage from the intrusion. It has shuttered its online transcript retrieval service for individuals. IRS is paying for credit monitoring for the 104,000 whose tax data was stolen. In addition, it is notifying all 200,000 people that the hackers have their personal data. Victims will also be able to apply for special identity protection ID numbers to thwart the filing of any more phony returns under their Social Security numbers.


The service will strengthen authentication procedures in light of the hack. IRS is also working to fight identity theft, partnering with tax software firms, payroll companies and state tax agencies to share data on any uncovered scams. The agency will do more to help identity theft victims. Congress will get in on the act, too.





IRS Phone Scam


Be wary of phone calls that purport to be from IRS. The Revenue Service and Treasury inspectors have issued warnings about a nationwide phone scam targeting taxpayers. Callers claim to be IRS employees and alter the caller ID readout to make it look as if IRS really is calling. Victims are being told that they owe taxes and must pay up fast or they will lose their driver's license, be arrested or deported.


IRS never makes unsolicited calls to people to tell them they owe more taxes or are due refunds. It contacts taxpayers first by mail. If you get one of these calls, notify Treasury inspectors. Also tell the Federal Trade Commission by filing a consumer complaint.

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