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Tax Scams: Beware of Substitute IRS Form 1040

July 28, 2016

Tax scammers keep coming up with new and innovative ways to target taxpayers. They have them shell out money or divulge confidential information. By informing taxpayers about the various tax scams carried out it can help avoid falling for them.

As tax professionals, our duty at A.G. Tax is to update taxpayers of the latest tax scams. Other than the ‘Federal Student Tax’ scam, another scamming technique used by scammers is the ‘Substitute IRS Form 1040’. This is a one of a kind tax scam. Taxpayers that fall for this, will have all their private and financial information at the scammer’s disposal.

The following is a brief overview of this scam:

What is the Substitute IRS Form 1040 Tax Scam?

Based on reported cases of this tax scam, taxpayers receive a fax consisting of a cover letter and an attached form that is labeled as substitute Form 1040, with the title as “Certificate of Current Status of Beneficial Owner for United States Tax Re certification & Withholding.”

The cover letter simply addresses the receiver as ‘Dear Valued Taxpayer’, rather than with the person’s name. It also bears the official signature of an IRS employee.

The cover letter states that the individual needs to fill out the attached form with the requested details as the IRS is updating its files. To further lure a taxpayer into providing the information, it also mentions a nominal tax refund receivable upon supplying this information.

The form requests the taxpayer to disclose significant amount of personal, and financial information. These include: mother’s maiden name (often used in security screening), bank account numbers, estimated assets, and other such information. Taxpayers are asked to sign the form, and send back along with a copy of their passport and driver’s license.

In addition to the above, the letter states that additional taxes and penalties may be applicable on failure to provide the required information.

Preventing Identity theft from IRS Tax scams

First, Identity thieves use personal and financial data to empty the victim’s financial accounts. They also run up charges on the victim’s existing credit cards, apply for new loans, file fraudulent tax returns and even commit crimes. Taxpayers therefore, should always be aware that the IRS does not request information in this manner by sending unsolicited faxes to taxpayers, nor does the IRS request personal and financial information in extreme details. Click here to see Common IRS letters.

When such information is released, it can be very difficult to turn back the event. Firstly, the Social Security Authority (SSA), IRS, banks and also other institutions will need to be notified that your information has been compromised. Then ,these authorities will re-issue a new Social Security Number, Bank Account Number(s), Passport Number, Driving License and other identification numbers.

Not only is this a time-consuming process, but these scammers are good at manipulating the data and reusing it as per their convenience, so one may likely fall victim again, due to the tactics used by IRS tax scammers.

AG Tax LLP Can Help

If you have any tax-related queries, need assistance with tax planning or filing your tax returns please contact us. We are a team of highly experienced tax professionals with extensive knowledge of U.S. and Canadian cross-border compliance as well as U.S. and Canadian tax laws.

As a full service accounting firm, AG Tax is dedicated to assist you with even your most complex tax needs.

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.

ABOUTAylett Grant Tax, LLP
With offices across Canada, we are positioned to manage and process the full scope of your Canadian, US and US Canada cross-border tax filing needs.
12752 28th Ave, Surrey, BC, V4A 2P4
104–4220 98 St NW Edmonton AB, T6E 6A1
With offices across Canada, we are positioned to manage and process the full scope of your Canadian, US and US Canada cross-border tax filing needs.
12752 28th Ave, Surrey, BC, V4A 2P4
104–4220 98 St NW Edmonton AB, T6E 6A1

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