How to avoid the latest tax scam

Getting a bigger tax refund than you expected usually warrants a balloon drop. But if the IRS suddenly deposits a large sum of unexpected cash into your account, you might want to hold the confetti.

It’s probably a scam.

Tax season is a vulnerable time, with millions of people’s sensitive information whizzing through digital space all at once. It’s also a stressful and often confusing time for taxpayers. When you add all that up, it spells opportunity for scammers—who, according to the IRS, are getting increasingly clever about how they defraud people.

Take the latest tax scam, for example. This year, identity thieves have put a new twist on an old classic: filing a fake tax return using stolen personal information. Instead of collecting the money directly, however, they’re now having it electronically deposited into the victim’s own bank account.

Here’s how it works:

1. The identity thieves steal personal and financial information, often from tax professionals through malicious software.
2. They file a fake tax return and have the refund—which may amount to as much as $20,000—deposited into the victim’s account.
3. They contact the victim and pretend to be the IRS asking for its money back. Some even bully victims with threats of criminal charges if they don’t comply.

Thousands of taxpayers across the nation have become targets of this new scam, and many fall for it because it has the ring of truth. After all, a quick peek at their checking account is all it takes to verify that the deposit was made.

Fortunately, once you know about the scam, it’s easy to spot. But what happens then? Here’s what you need to know about avoiding the most common tax scams.

What to do if you get an erroneous refund

If you get a sudden boon from the IRS that doesn’t jive with your tax return, the last thing you want to do is spend it. Nor should you give it to anyone who calls to demand it back. Instead:

• Contact your bank or credit union’s automated clearinghouse department and have the funds returned to the IRS. Then take the necessary steps to secure your account information.
• If the refund arrives in check form, follow these instructions instead.
• Call the IRS to explain why you’re returning the money.
• Let your tax preparer know that a data breach has occurred.
• Report the identity theft to the federal government.

What to do if the “IRS” contacts you

When the IRS wants to get in touch with a taxpayer, its standard practice is to send a letter via mail. Keep in mind the IRS will never ask for you personal or financial information over email, text or social media. Nor will they call you to demand payment, so be wary of any phone calls from the IRS claiming you owe money. If you do get one:

• Hang up and contact the agency using a verified public phone number, such as 800.829.1040, and ask whether the call was legit.

• If you believe someone impersonating the IRS has contacted you, report the incident to the Treasury Inspector General for Tax Administration.
• Forward any suspicious emails from the IRS to phishing@irs.gov.

How to avoid getting targeted

The best way to ward off potential scammers is to file your taxes as early as possible, and use direct deposit to get your refund. You can also get an Identity Protection PIN from the IRS, which verifies your identity each time you file—but once you do it, you can’t opt out in the future.

When it comes to filing your taxes, a little extra caution never hurts. And when you finally get that refund you’ve been waiting for, make sure it’s the right amount before you spend it.

*Note: The above information is not intended as tax advice. Please consult your tax professional for tax information.