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Refund Scams and the Importance of Filing Early

January 15, 2015

Tax scammers become active during tax season, as the number of financial transactions conducted during this period is substantial. Millions of taxpayers receive tax refunds from the IRS. Scammers try to steal refund money using identity theft.

Identity theft: The mammoth tax scam

Identity theft is the backbone of many tax scams, claiming thousands of victims each year. According to the Steve Poporoff of the Federal Trade Commission (FTC), complaints made about identity theft for the purposes of tax refund fraud has tripled since 2010. Out of the total number of consumer complaints the FTC received in 2014, 44% were about identity theft. Identity theft has retained the number one spot in the IRS’ Dirty Dozen tax scam list year after year.

How scammers steal identity

Scammers often pretend to be the IRS or another government institution to gain the trust of their victims. They ask people to share personal and financial information such as filing status, Social Security Number, income, and even PINs and credit card numbers. “Scammers are very adept at posing as the IRS – whether online, over the phone, or through the mail. Once they’ve gained a consumer’s trust, they quickly move on to fooling victims into giving out precious personal and financial information,” Angie Barnett, president and CEO of BBB Greater Maryland said.

They use this information to file a fraudulent tax return on the victim’s behalf, manipulating income figures, and claiming false credits and deductions to pocket huge refunds. They may also conduct other financial crimes using the stolen information.

Why file early

A simple way to avoid identity theft is to file your tax return early. After you have filed your return, even if tax scammers steal your tax filing information, they will not be able to get a refund because the IRS would have already processed your return. The sooner you file your return, the safer you are from identity theft tax scams.

Correcting the problem

If you do become a victim of identity theft, make sure you report the issue to the IRS as soon as possible. The IRS will require proof that the theft occurred. They will closely review your tax and personal details, tax return and match it against your previously filed tax returns and information from third parties. Ultimately, your refund can be delayed for months.


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