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Wednesday, August 15, 2018
IRS Early Filing Tax Refund Scam Growing Like Mad

There’s a relatively new scam in town that’s been picking up speed like a bullet train and you might already be a victim. This scam involves identity thieves using your information to file electronic returns with the IRS claiming refunds, some much higher than you would be entitled to, and pocketing the funds before you have had a chance to file your tax return.  The U.S. Government Accountability Office (GAO) states that there was a 62% increase in this crime from 2011 to 2012.  Haven’t heard about it? Get ready to be scared into action.

Identity thieves used to be relegated to the realm of credit cards.  In the boom days of real estate some thieves moved on to mortgage fraud.  Now that about 80% of all tax returns are filed electronically, some thieves have moved on to committing a tax fraud which can land the victim in serious hot water.

It all happens this way:  A thief gets access to your social security number and name.  They may even have a bit more information about you such as your date of birth and address.  Using this information the thief may file a tax return using fraudulent working information claiming refunds which they then pocket.  Since the IRS has encouraged electronic filing, some refunds can be received in as little as a week.  These fraudulently claimed funds are loaded onto prepaid debit cards by Visa and Mastercard that are readily available at your local drug store.  The funds are loaded onto the cards by providing the IRS with a routing and account number which the card company provides.  The thief can then anonymously spend this cash with you none the wiser. The IRS believes that it paid out at least $754 million in suspicious tax refunds in 2012, making this the third largest theft of government funds.

Most individuals will not find out that they have been a victim of this crime until they attempt to file their taxes.  The second refund would be rejected by the IRS leading the victim down a nearly year-long saga with the IRS. Or worse yet, the victim may receive an audit notice in the mail.

But, fraudulent tax returns aren’t the only way that individuals are stealing your tax returns money.  Tax fraud is also committed by preparers who tell victims that they are entitled to a lower amount and divert part of the refund to their own accounts. Some fraudsters are even set up “pop-up” style tax return stores fooling victims into thinking that they are legitimate companies.  Still others are being fooled online by phishing e-mails designed to appear to be from the IRS which ask for personal information which is then used to commit tax fraud.  Finally, there have been phishing sites claiming to file free returns that are, again, designed to separate the victim from their personal information.

So, how do you protect yourself?  It’s not as simple as shredding all of your personal information before putting out your garbage.  Your basic information can be stolen from a third party by hackers.  If you’ve ever seen a news story about information being millions of pieces of information being hacked from a bank of large company, your information might already be compromised.  The best way to combat this fraud is by filing your return as early as possible and by doing so through a reputable provider.

If you have been a victim of this fraud, the process of resolving this issue can take up to one year.  While the IRS may immediately replace a lost or stolen refund check fixing a fraudulent filing is a longer process.  You must contact the IRS’s Identity Protection Specialized Unit or the Taxpayer Advocate Service using Form 911 (how appropriately named).

Get out there and get your taxes done as soon as humanly possible.  It might just save you from being a victim of this crime.

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7 Comments

Jackie February 6, 2013 at 1:27 pm

Wow….this is scarey. Thanks for sharing this info.

Mrs. Pop @ Planting Our Pennies February 6, 2013 at 6:19 pm

Tax Refund fraud isn’t the only kind of new fraud. I was recently the victim of unemployment benefits fraud.
http://www.plantingourpennies.com/2013/02/01/apparently-im-unemployed-who-knew/

We all need to be more vigilant than ever about this stuff.

Amanda L Grossman February 6, 2013 at 6:26 pm

So many scams out there! Thank you for sharing this one; I hope none of your readers experience it.

Brick By Brick Investing | Marvin February 8, 2013 at 11:12 am

Very sad and unfortunate indeed. I will be the first to admit that I can’t produce a 100% solution to the “tax problem” but I think we can all agree that they system needs to change. When I sit back and think about the IRS I wonder why they can’t compute a tax bill and mail it to my home. That would take out all the guess work right? No more charging people insane amounts of interest because they made a mistake on their taxes. No more 1000 page book of regulations. Of course I’m simply going on an ill advised rant but it’s absurd that I have to take a significant time to figure out such a simple task.

Wendy February 23, 2015 at 9:35 am

As of Jan 1, 2015, there are new limits in place that will stop a preparer from splitting up a refund and directing part of that refund into their own bank account. Direct deposit of a refund will only happen if the bank account is in the taxpayer’s name. Splits between a taxpayer bank account and a preparer bank account are no longer allowed. Direct deposits will only be allowed to go into an account with the taxpayer’s name on it – if the bank account has your name and the name of the preparer on it the direct deposit will not happen.

As of Jan 2015 there is also a limit on how many refunds can be directly deposited into a bank account. Direct Deposit for refunds is limited to 3 deposit’s into any one account. More than 3 deposits and the excess over 3 won’t happen by direct deposit. This new limit covers checking, savings, prepaid debit cards, reloadable debit cards, etc.

The only way an e-filed return will make it through and be accepted by the IRS as filed is if the thief knows your AGI from the return you filed the previous year or has an IRS PIN number. AGI is fairly hard to come by, but a PIN is not. Anyone going to the PIN retrieval website and has your name, address from last year’s return, your DOB, and your SSN can get a PIN number. That info is required to get a PIN.

    Sandy Smith February 24, 2015 at 10:43 am

    Thanks for the update Wendy! Timely information to have to keep unscrupulous people from profiting from your hard work.

Jason Vitug February 23, 2015 at 10:24 am

Didn’t know about those mom and pop stores but you are right there is a growing number of people who are finding out they “have already filed” their tax return.

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