Nothing More Certain Than Fraud and Taxes
Tax season is upon us and with it comes both confusion and fear. The Trump administration has overhauled the tax system which is likely to influence this year’s tax preparation and next year’s planning. Added to this confusion is the fear brought on by the ever-evolving tax-related scams that continually change and pray on our fears of making a mistake.
Tax season fuels important infrastructure, education, refunds to those who need them, and…sometimes unfortunately funds fraudsters, too. Indeed, this could be called a scammer’s busy season.
We called attention to some of this last year but the severity and widespread nature of tax-related scams bear repeating. According to the Treasury Department, “more than 10,000 tax scam victims have paid in excess of $54 million via phone scams perpetrated since October 2013.” That is a lot of money and a lot of unfortunate victims.
Fraudsters thrive on confusion; they trick consumers into opening emails that seem legitimate, and businesses into approving payments that appear to be authorized. Another driver that is less discussed is more philosophical: manufacturing fear.
A common misconception about who “falls for” tax fraud is that the elderly are most at risk. While seniors are certainly a target for fraudsters, a new report by the FTC suggests that it is actually tech-savvy millennials who are losing money more often than seniors—40 percent of 20-29 year olds who reported fraud indicated that they actually lost money from it.
We want to be careful to avoid the murky waters of speculation, but it’s possible that millennials are both more willing to share their information online, and less primed to recognize fraud when it rears its ugly head. According to Monica Vaca, associate director of the FTC’s Division of Consumer Response and Operations, “younger consumers may be less familiar with what a scam looks like.”
Another way fraudsters can take advantage of people this year—many contract workers participating in the gig economy could be extra confused about how to file their taxes. In fact, a survey last year from the National Association of the Self-Employed found confusion in around 30 percent of such laborers.
Another reason tax fraud schemes may be so lucrative is their appeal to fear. For instance, while a phishing email from a “Nigerian Prince” may appeal to one’s sense of empathy, it doesn’t exactly have the victim scrambling for their checkbooks the way fear of prison might. The risk of legal action for nonpayment of “back taxes,” when it comes from a seemingly legitimately IRS agent, could cloud almost anyone’s judgment.
Practically each tax season, there will be a new method fraudsters are using to try to scare people into sharing sensitive information and money. According to the IRS, “a new scam that began with cybercriminals stealing data from several tax practitioners’ computers and filing fraudulent tax returns” had already been identified just a few days into tax season this year.
Spotting a Scam
The IRS will never demand immediate payment or ask for financial information over the phone or threaten law enforcement action. And remember, file early!
Consumers must always stay vigilant, but especially February through April. It’s not simply up to the IRS to make sure that a comprehensive fraud prevention strategy is in place – you need to have one for your organization too.
To learn all about fraud in its many forms as well as best practices for fraud prevention, study up with Kount’s new Payments and Fraud Glossary, available here: https://www.kount.com/payments-and-fraud-glossary.