Being informed of tax scams is very important for taxpayers in order to protect their assets and avoid financial and taxation problems since information like Social Security Number, Tax Identification Number, and Electronic Filing Identification Numbers (EFINs) are highly confidential, and once leaked it can be very difficult to maintain and provide the same level of security with respect to tax and personal information.
Although the U.S. Internal Revenue Service (IRS) tries its best to provide enhanced security while e-filing and protecting taxpayers’ information, it is the duty of every taxpayer to keep themselves informed about possible tax scam methods and how to protect themselves from criminals and thieves.
As tax preparers, we believe it is our responsibility to keep our clients and other taxpayers informed about the various measures to exercise when it comes to protecting their tax information, therefore in this article AG Tax analysts have summarized some of the common tax fraud methods and how to recognize and avoid them.
Federal Student Tax Scams
Tax scammers target young taxpayers by phone, generally college-goers, or those who have recently graduated and try to convince these individuals that they owe money to the government due to unpaid ‘federal student tax’. They inform taxpayers that they could face severe consequences, such as: police involvement, or at times even garnishing their salary, etc.
Fraudsters are often well-informed about their victims, making the call seem very real. Because of this, many people will make the requested payment to avoid conflict. The small payment may appear harmless but if this payment is made online while on the call, the scammer now has the financial details of the victim as this payment is not going to the IRS but the scammer, who could further use the information obtained for other financial frauds.
Automated Phone Scam
There has been an increased amount of automated phone calls where scammers leave urgent call back requests through the phone telling taxpayers to call back to settle their “tax bill.” In the past, fake calls would come from a live-person but tax scams are evolving and using more and more automated calls to reach a larger number of victims. These fake calls generally claim to be the last warning before legal action is taken. Once the victim calls back, the scammers may threaten to arrest, deport or revoke the driver’s license of the victim if they don’t agree to pay.
In this scenario, tax scammers use “bait” to lure taxpayers into disclosing personal information. Headlines such as “Update your account now”, “You have a refund from the IRS”, lure people by email, telephone calls and texts into giving up cash, passwords, social security numbers and their identity. The scammers pose as people you can trust, your bank, credit card company, tax software providers, the IRS, the State tax department, etc. They create websites that look very authentic. You should remember no legitimate company will ask you for sensitive information by email.
These fraudsters not only try to imitate the IRS but also state revenue departments. They are veterans in their field and know how to direct the conversation to create fear and change the mind of the taxpayer into making the payment.
It is important that taxpayers should be aware that the IRS will NEVER:
- Call to demand immediate payment over the phone, nor will the agency call about taxes owed without first having mailed you a bill.
- 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.
- Require you to use a specific payment method for your taxes, such as a prepaid debit card, gift card or wire transfer.
- Ask for credit or debit card numbers over the phone.
If you get a phone call from someone claiming to be from the IRS asking for money and you don’t owe taxes, it is best practice to not divulge any information and hang up immediately. As a precautionary step, use TIGTA’s IRS Impersonation Scam Reporting or call 800-366-4484 to report the scam. Taxpayers may also report it to the Federal Trade Commission by visiting FTC.gov “File a Consumer Complaint.” Please add “IRS Telephone Scam” in the notes.
However, in case the taxpayer has some tax liabilities due, he/she should contact the IRS directly at 1-800-829-1040 before making any payments, no matter how small the amount may be, as it may be possible that the scammer may ask the taxpayer to make a 1% or 5% of the tax amount due, to avoid the IRS from taking any measures against the taxpayer temporarily.
AG Tax LLP Can Help
If you have any tax-related queries, need assistance with tax planning or filing please contact AG Tax. Our tax professionals are highly-experienced with U.S. and Canadian tax laws and can provide you the right guidance to handle your tax situation.
Aylett Grant Tax LLP is a full service accounting firm with a dedicated team of experts, who are highly-qualified and experienced in handling situations related to U.S., Canada and other international tax laws.
We can assist with:
- Canadian Personal and corporate tax returns
- Cross Border Taxation and Business Planning
- U.S. Personal and Corporate Taxation
- Disclosure of Foreign Assets and other information filings
- Retirement planning
- Estate Planning, Inheritance tax advice
To obtain a quote or to arrange for a consultation to discuss your tax related queries, please contact us at:
- 416-238-5920 (Greater Toronto Area, ON)
- 604-538-8735 (Greater Vancouver Area, BC)
- 780-702-2732 (Greater Edmonton Area, AB)
Disclaimer: The information in this publication is accurate as of the time of its publication. AG Tax assumes no responsibility for changes to tax legislation subsequent to the publication of this document. The information provided is for general information purposes only and should not be acted upon without seeking professional advice. If you would like to engage our services, please contact our staff and obtain authorization to send our firm confidential information. A client relationship is not created by the transmission of information. A client relationship is only formed with our firm when a scope and engagement letter signed by the firm and the potential client detailing the terms of engagement is present.