US Tax Considerations Phishing Scams and Identity Theft

A couple of days ago, my wife received an automated call, allegedly from the Internal Revenue Service, while I was out of the house. The recording went on to state this was a final notification from the IRS and litigation will be commenced: a settlement call. The recording then gave a case number twice and hung up.

I got a frantic call from my wife, asking me if this was a scam or something legit. I let her know it was a new phishing scam and she could probably expect a follow up call either later that day or sometime later in the following week. She should try to get a badge number, a name and contact information, then hang up and report it to the IRS. Fortunately for her, she had a tax expert in her corner.

Let’s talk about phishing scams and identity theft for this round of considerations…

But First, The Required Legalese…

Any accounting, business or tax advice contained in this communication, including attachments and enclosures, is not intended as a thorough, in-depth analysis of specific issues, nor a substitute for a formal opinion, nor is it sufficient to avoid tax-related penalties.

Understanding the Seriousness of the Problem

Social engineering, phishing, spear phishing and identity theft have been more aggressively targeting tax professionals, the IRS and tax related agencies now more than at any point in the past. The amount of personal data available one has to surrender for income tax reporting is a virtual honeypot for hackers and identity thieves all over the world, so the attention from the thieves is warranted.

For a glimpse, see the sheer volume and frequency of IRS notifications on the subject:

IRS Warns of Back-to-School Scams; Encourages Students, Parents, Schools to Stay Alert (August 18, 2016)
https://www.irs.gov/uac/irs-warns-of-back-to-school-scams

New Phishing Scheme Mimics Software Providers; Targets Tax Professionals (August 11, 2016)
https://www.irs.gov/uac/newsroom/new-phishing-scheme-mimics-software-providers-targets-tax-professionals

IRS Warns Taxpayers of Summer Surge in Automated Phone Scam Calls; Requests for Fake Tax Payments Using iTunes Gift Cards (August 2, 2016)
https://www.irs.gov/uac/irs-warns-taxpayers-of-summer-surge-in-automated-phone-scam-calls-and-requests-for-fake-tax-payments-using-itunes-gift-cards

IRS, Partners Warn Tax Preparers of Data Theft Risks; Launch New Campaign to Increase Awareness (July 6, 2016)
https://www.irs.gov/uac/irs-and-partners-warn-tax-preparers-of-data-theft-risks-and-launch-new-campaign-to-increase-awareness

Security Summit Reviews 2016 Accomplishments, Announces 2017 Initiatives (June 28, 2016)
https://www.irs.gov/uac/newsroom/security-summit-reviews-2016-accomplishments-announces-2017-initiatives

IRS Warns of Latest Scam Variation Involving Bogus “Federal Student Tax” (May 27, 2016)
https://www.irs.gov/uac/newsroom/irs-warns-of-latest-scam-variation-involving-bogus-federal-student-tax

New Tax Scam Targeting Tax Professionals (April 15, 2016)
https://www.irs.gov/uac/newsroom/new-tax-scam-targeting-tax-professionals

IRS Warns Washington D.C., Maryland, Virginia Residents of New Phishing Scam Targeting National Capital Area (April 6, 2016)
https://www.irs.gov/uac/newsroom/irs-warns-washington-dc-maryland-virginia-residents-of-new-phishing-scam-targeting-national-capital-area

IRS’s Top 10 Identity Theft Prosecutions: Criminal Investigation Continues Efforts to Halt Refund Fraud (March 21, 2016)
https://www.irs.gov/uac/newsroom/irss-top-10-identity-theft-prosecutions-criminal-investigation-continues-efforts-to-halt-refund-fraud

Consumer Alert: Scammers Change Tactics, Once Again (March 14, 2016)
https://www.irs.gov/uac/newsroom/consumer-alert-scammers-change-tactics-once-again

IRS Alerts Payroll and HR Professionals to Phishing Scheme Involving W-2s (March 1, 2016)
https://www.irs.gov/uac/newsroom/irs-alerts-payroll-and-hr-professionals-to-phishing-scheme-involving-w2s

Consumers Warned, of New Surge in IRS E-mail Schemes during 2016 Tax Season; Tax Industry Also Targeted (February 18, 2016)
https://www.irs.gov/uac/newsroom/consumers-warned-of-new-surge-in-irs-email-schemes-during-2016-tax-season-tax-industry-also-targeted

Phishing Remains on the IRS “Dirty Dozen” List of Tax Scams for the 2016 Filing Season (February 3, 2016)
https://www.irs.gov/uac/newsroom/phishing-remains-on-the-irs-dirty-dozen-list-of-tax-scams-for-the-2016-filing-season

Phone Scams Continue to be a Serious Threat, Remain on IRS “Dirty Dozen” List of Tax Scams for the 2016 Filing Season (February 2, 2016)
https://www.irs.gov/uac/newsroom/phone-scams-continue-to-be-a-serious-threat-remain-on-irs-dirty-dozen-list-of-tax-scams-for-the-2016-filing-season

Identity Theft an Ongoing Concern on the IRS Annual "Dirty Dozen" List of Tax Scams to Avoid (February 1, 2016)
https://www.irs.gov/uac/newsroom/identity-theft-an-ongoing-concern-on-the-irs-annual-dirty-dozen-list-of-tax-scams-to-avoid

Identity Theft Video Series Available; Special Series to Help Taxpayers Avoid Pitfalls and Stay Safe Online (January 19, 2016)
https://www.irs.gov/uac/newsroom/identity-theft-video-series-available-special-series-to-help-taxpayers-avoid-pitfalls-and-stay-safe-online

What the IRS Will Do and Will Not Do if a Balance Is Owed

Generally speaking, the bulk of the scams revolves around notification via email or phone call, and involves threats of legal action and law enforcement if payment is not received immediately.

The IRS will never contact you via email or telephone first. The IRS will always mail you a notice of any balance owed, then allow you the opportunity to question or appeal the amount due.

In the event you receive a phone call, some of the signs you need to protect yourself (from the IRS Website)

• Call to demand immediate payment using a specific payment method such as a prepaid debit card, gift card or wire transfer. Generally, the IRS will first mail you a bill if you owe any taxes.
• Threaten to immediately bring in local police or other law-enforcement groups to have you arrested for not paying.
• Demand that you pay taxes without giving you the opportunity to question or appeal the amount they say you owe.
• Ask for credit or debit card numbers over the phone.

What you should do (from the IRS Website)

• Do not give out any information. Hang up immediately.
• Search the web for telephone numbers scammers leave in your voicemail asking you to call back. Some of the phone numbers may be published online and linked to criminal activity.
• Contact TIGTA to report the call. Use their “IRS Impersonation Scam Reporting” web page or call 800-366-4484.
• Report it to the Federal Trade Commission. Use the “FTC Complaint Assistant” on FTC.gov. Please add “IRS Telephone Scam” in the notes.
• If you think you might owe taxes, call the IRS directly at 800-829-1040.

Email scams (from the IRS Website)

Taxpayers receive an official-looking email from what appears to be an official source, whether the IRS or someone in the tax industry.

The underlying messages frequently ask taxpayers to update important information by clicking on a web link. The links may be masked to appear to go to official pages, but they can go to a scam page designed to look like the official page. The IRS urges people not to click on these links but instead send the email to [email protected].

Recent email examples the IRS has seen include subject lines and underlying text referencing:

• Numerous variations about people's tax refund.
• Update your filing details, which can include references to W-2.
• Confirm your personal information.
• Get my IP Pin.
• Get my E-file Pin.
• Order a transcript.
• Complete your tax return information.

Wrapping It Up

Identity theft has become a very serious issue with taxpayers in the past two years. Be certain you understand the IRS will ALWAYS contact you via mail first, notify you of any outstanding tax balance, ad give you the opportunity to appeal it. Be sure to report any suspicious phone calls and emails immediately to them.

Have a tax question? Please feel free leave a question in the comment section below and I may feature it in a future blog post or email me [email protected]

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