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Tax News You Can Use

Avoiding Scammers Posing as the IRS

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Tax News You Can Use | For Professional Advisors

 

Jane G. Ditelberg

Jane G. Ditelberg

Director of Tax Planning, The Northern Trust Institute

Cybercrime of all kinds is on the rise. Recent reports predict that the cost of cybercrime worldwide will reach $9.5 trillion in 2024. Criminals seeking to steal personal information for identity theft or to steal assets by coercing their victims into transferring funds are using increasingly sophisticated tools to appear legitimate. “Phishing” is the term for emails and other forms of written contact that attempt to disguise their origins for these purposes, while “smishing” is the term for SMS text, and “vishing” is the term for phone calls, including robocalls and voice messages.

Scams involving the IRS

There is a wide variety of phishing and vishing scams involving criminals posing as IRS agents who demand payments or personal information from taxpayers. Other times, identity thieves file false returns claiming refunds that belong to their victims. There are also scams that direct the victim to click a link labeled as from the IRS to steal information or download malware to the victim’s computer. Some promise unclaimed refunds, resolution of past tax debt or offer other enticements. Sadly, many of these scams target the elderly, recent immigrants, or the newly employed. At times, the communication may threaten the victim with large financial penalties, or even incarceration or other punitive measures.

Often the scammers are quite sophisticated in their methods. They may take great pains to appear legitimate. Their communications may contain other stolen personal information, such as the taxpayer’s address or social security number, to make the email or letter appear to be more official. As with phishing and similar scams in other contexts, there may be a sense of urgency to act immediately to avoid a penalty or to obtain a promised benefit.

The IRS is concerned about fraud and has issued numerous consumer alerts regarding these scams. The IRS website has information about avoiding scams, identifying scams it has become aware of, and reporting scams. The IRS also has YouTube videos on its website with additional tips. Taxpayers looking for more information can go to https://www.irs.gov/newsroom/tax-scamsconsumer-alerts.

Tips for distinguishing between legitimate and fraudulent communications from the IRS

There are tips for avoiding some of these scams. Understanding how the IRS legitimately contacts taxpayers can weed out many of the scams immediately. Knowing a taxpayer’s rights and where to turn for assistance if a scam is suspected can help taxpayers avoid these traps and protect their identity and their assets. Additional tips can be found at https://www.irs.gov/newsroom/how-to-know-if-its-really-the-irs.

  • The IRS never initiates contact with taxpayers by email, or contacts taxpayers at all via text message, messaging apps like WhatsApp or via social media. Virtually all initial contact from the IRS will be by U.S. mail or by a phone call requesting an appointment with an IRS agent.
  • IRS agents do not request confidential information over the phone.
  • IRS agents do not demand payment over the phone in any form. The IRS will send a taxpayer a written notice of deficiency, which is like a bill for taxes they have concluded the taxpayer owes. The taxpayer has the right to review and dispute the bill before paying it.
  • IRS agents do not demand payment by credit or debit card, wire transfer, cash, gift cards cryptocurrency or by payment apps such as Venmo or CashApp. While a taxpayer often can elect to pay via wire transfer or credit card, taxes can always be paid by check or money order payable to “United States Treasury.”
  • A request to deposit cash into a cryptocurrency ATM to pay taxes or any other fine or penalty is always fraudulent.
  • If a return is selected for audit, the taxpayer may get a letter (or on occasion a phone call) to set up an appointment or a request for documents. An IRS agent will not ask a taxpayer for payment to “stop” the audit.
  • Most taxpayers can now apply for an “IP PIN” from the IRS. IP stands for identity protector, and it is designed to prevent identity theft or the filing of fraudulent returns using a taxpayer’s data. An IP PIN is a six-digit number that is entered on page 2 of form 1040. If a taxpayer has an IP PIN, they must use it on all returns filed that year, and any returns filed without the IP PIN (whether electronically or on paper) will automatically be rejected by the IRS.
  • To report a phishing or vishing scam, taxpayers can email phishing@irs.gov.
  • To verify the identity of someone who contacts them or of written correspondence purporting to be from the IRS, a taxpayer can contact IRS customer service. For more information, visit https://www.irs.gov/help/let-us-help-you.

What about in-person visits from agents?

In certain cases, an IRS agent may make an in person visit. The taxpayer should be aware of the tax issue prior to the visit because the IRS will first try to resolve the matter by mail. However, while on occasion the agent may make an appointment, other times the visit will be unannounced. A legitimate IRS agent will have two official forms of identification – an HSPD-12 card, which is the standard federal government credential, and a pocket commission. A taxpayer has the right to see these and to verify the agent’s identity by calling a dedicated IRS telephone number for verifying the agent. A taxpayer may also request the name and telephone number of the agent’s manager as another option for verifying the validity of the inquiry. There are additional resources at www.irs.gov regarding verification of the identity of an agent or officer. If taxes are due, the agent will ask for payment, but, again, tax can always be paid by check or money order payable to the United States Treasury.

Turn to experts you trust

If a taxpayer receives a notice from the IRS or other communication purporting to be from them that the taxpayer has questions about, the best precaution is to contact their return preparer, attorney or accountant to review it before responding. These professionals have training and experience to review and understand any legitimate notice and help respond, as well as to help identify spoofs from scammers.

Taxpayers can also consult www.irs.gov for consumer alerts. A taxpayer who is concerned about an inquiry into a return they filed or a payment they made can create an account at https://www.irs.gov/individuals/get-transcript to review their tax transcript to confirm activity in their account. This is helpful also if it appears an identity thief has filed tax documents using a taxpayer’s personal information.

Other government agencies offering information about phishing and vishing scams include:

  1. The Federal Trade Commission https://consumer.ftc.gov/articles/how-recognize-and-avoid-phishing-scams, which offers a way to report voice messages that are scams as well as ones by email or in writing.
  2. The FBI https://www.fbi.gov/how-we-can-help-you/scams-and-safety/common-scams-and-crimes/spoofing-and-phishing.
  3. Local law enforcement (for identity theft or theft of funds).
  4. The office of the Attorney General for the taxpayer’s state.

Simple guidelines to remember

Some commonsense rules can help identify scams in the tax arena and elsewhere. First, be sure to identify who the communication is actually from. Addresses can be spoofed, and slight differences can trick the eye. Should a taxpayer open an email from IRS.net? What about one from lRS.gov? Neither of those is legitimate — one - uses .net instead of .gov, the other uses a lowercase L (l) instead of an uppercase i.

Second, consider whether the request is reasonable, keeping in mind the information above. Is the recipient being asked to respond urgently with an irrevocable release of funds or information? Are they being asked to click on a link in an email or open an attachment? None of these things is consistent with IRS communication protocols.

Third, does the communication contain an express or implied threat? While many taxpayers may feel apprehensive about any communication from the tax authorities, an IRS agent is not going to threaten bodily harm. A taxpayer can report threats by requesting the agent’s identification number or the name and telephone number of the agent’s manager. Other options are available on thewww.irs.gov website.

Finally, things that sound too good to be true usually are. If someone is promising to erase a taxpayer’s back taxes, or wants a taxpayer to click a box to claim a past refund, or offers a chance to avoid paying any income tax at all, be skeptical. Taxpayers can protect themselves by reviewing the available taxpayer resources to avoid a scam and, if in doubt, contacting their tax preparer or other legal or tax advisors to ensure that the inquiry is legitimate.

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Disclosures

© 2024 Northern Trust Corporation. Head Office: 50 South La Salle Street, Chicago, Illinois 60603 U.S.A. Incorporated with limited liability in the U.S

This information is not intended to be and should not be treated as legal, investment, accounting or tax advice and is for informational purposes only. Readers, including professionals, should under no circumstances rely upon this information as a substitute for their own research or for obtaining specific legal, accounting or tax advice from their own counsel. All information discussed herein is current only as of the date appearing in this material and is subject to change at any time without notice.

The information contained herein, including any information regarding specific investment products or strategies, is provided for informational and/or illustrative purposes only, and is not intended to be and should not be construed as an offer, solicitation or recommendation with respect to any investment transaction, product or strategy. Past performance is no guarantee of future results. All material has been obtained from sources believed to be reliable, but its accuracy, completeness and interpretation cannot be guaranteed.

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