IRS tax scams and tax return identity theft are a growing problem.  In 2011 the IRS processed about 145 million returns.  As of May 16, 2012, the IRS had pulled 2.6 million returns for possible identity theft.  Their current inventory of identity theft cases is more than 450,000 and they estimated that identity-theft related fraud accounted for approximately 1.5 million tax returns in excess of $5.2 billion.  Investigators found a single address that was used to file 2,137 tax returns for $3.3 million in refunds.  These are astonishing numbers!

Thieves are using personal information, such as names and Social Security numbers, without permission to commit fraud on tax returns in order to claim refunds or other credits to which a taxpayer is not entitled.  These thieves typically file early in the tax season before you do which allows them to receive a refund before you file the real return.  When you file the real return it will be flagged for review which make take months to straighten out.

How are thieves obtaining this personal information?  The most common ways include email or telephone phishing and dumpster diving.

How can you protect yourself from IRS tax scams?

Never discard tax returns, bank records, credit card receipts or other records containing personal and financial information. Shred these documents!  You can purchase a shredder for your home for under $30 or look for banks and other institutions in your community that offer shred fests.  Never take action on an email that appears to be sent by the IRS.  Some taxpayers receive email messages allegedly from the IRS advising them that they are under investigation or have a refund pending with a link to proceed.  The IRS does not send unsolicited, tax account related emails and never asks taxpayers for financial information, including PINs and passwords, via email.

Have you seen any form of IRS tax scams?  Leave a comment below to let us know what you’ve seen.

Source:  Stopping Tax Identity Theft, February 2013 Journal of Accountancy  http://journalofaccountancy.com/Issues/2013/Feb/20126507.htm