Tax Season 2017: Fraud Down, But Not Out
It’s peak Tax Season as April 18th is fast approaching and tax preparers – professional and amateurs-alike – are rushing furiously to file. And while it’s been a notorious target for fraudsters, the IRS has actually been cracking down on tax return fraud with new technologies.
After strengthening its computer
filtering technology, the IRS says identity theft income tax return fraud dropped dramatically in 2016, with a 46 percent decrease in the number of victims. The agency also reported that it also stopped one million fraudulent refunds from being issued last year with savings of almost $6.6 billion. That’s a vast improvement from the 2013 $5 billion lost – about $50 per American – from paying fraudulent returns.
Many of the strongest efforts have been at the state level, with states like Utah, South Carolina, and Maryland implementing new technologies and data analytics to catch and detect fake tax returns. Along with a team of senators, Minnesota Senator Amy Klobuchar has even introduced legislation to combat identity theft-related tax fraud. And while these efforts are a vast improvement and a much need step in the right direction, the IRS has been playing catch-up and still has a long way to go in keeping up with the speed of fraud.
When fraudsters come across one road block, they’re bound to devise new ways around them. While the IRS has made many improvements, here are a few vulnerabilities and tax schemes to keep your eye out for this season:
- Phishing Emails: It’s worked for your iCloud, your bank account, and even your PayPal. Why not tax professional software? One of the top schemes this tax season, phishing emails have targeted tax professionals and their tax preparation software accounts, claiming they’ve been “suspended due to errors in your security details.” The email also requests the tax professional to click an “unlock” link to retrieve access, which only ends up bringing them to a fake web page to enter their user name and password. The scheme has been so successful and widespread that the IRS and state tax agencies have issued a warning. Remember, the IRS does not use unsolicited email, text messages, or any social media to discuss your personal tax issues.
- W-2’s: Specifically within phishing emails, the W-2 form email phishing scam has evolved and spread throughout a variety of industries. Originally targeting the corporate world, fraudsters would send an email on behalf of an organization executive to HR or payroll departments demanding a list of all employees and their W-2 information. Fraudsters have expanded the W-2 scheme by phishing school districts, non-profits, local governments, and other organizations (even in Silicon Valley!) for information and also requesting wire transfers. Along with a trove of information from data breaches, the W-2 scam offers fraudsters even more information to work with in the future. The IRS has warned that it's one of the most dangerous schemes they’ve seen in a longtime.
- iTunes Tax: Not everyone will get a refund this year, and some may have to pay additional taxes after the file. What won’t happen is the IRS asking you to pay additional taxes via iTunes or other gift cards. Fraudsters masking as IRS agents have been calling unsuspecting citizens demanding payment with iTunes or other kinds of gift cards. While the IRS will never demand payment via prepaid debit card or gift card, about 70 percent of tax fraud scams involve iTunes gift cards. The IRS states it will never call to either “demand immediate payment over the phone, or call about taxes owed without first having mailed you a bill."
These schemes and others remind us that it’s not just 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 find more information and resources about fraud prevention, visit our Events section for upcoming webinars and in-person seminars.