Tag Archives: tax fraud

Be on the Lookout for Tax Scams

Las fall, authorities in India busted nine — yes, nine — bogus IRS call centers, arresting 70 people on suspicion of tricking (and often scaring) Americans into sending money to settle “pressing” but nonexistent tax bills.

You receive a call from a purported IRS agent claiming you owe money and must pay it immediately. If you can’t (or don’t) come up with the money pronto, well, you can expect a police officer or U.S. marshal at your door, and you will be arrested and thrown in jail. In a 21st-century version of this scheme, you receive a robocall where an automated voice directs you to call a specific number to settle your debts with Uncle Sam. If you don’t call back right away, you could be anything from sued to arrested to deported, or maybe you’ll just have your driver’s license revoked.

It’s an inelegant ruse, of course. The prize? Your hard-earned cash and, for good measure, some of your personally identifiable information (PII).

See also: Implications for Insurance Taxation?  

I probably don’t have to explain this hot-and-heavy approach because you’ve probably been on the receiving end of one of these phone calls. IRS scams are so prevalent they topped the Better Business Bureau’s top scams of 2015 by a mile — and that was well before the IRS itself issued a warning to taxpayers saying there was a “summer surge” last year in IRS impersonation scams, with a new variant asking poor, unsuspecting taxpayers to fork over payment on iTunes gift cards.

A sigh of relief?

If you think the major bust in India means you can breathe a little easier every time your phone rings, unfortunately, you’re wrong.

Make no mistake, those nine phony call centers represent only a small fraction of all the nefarious enterprises out there. Consider the latest stats from the U.S. Treasury Inspector General for Tax Administration published in The Wall Street Journal: 8,000 victims have paid more than $47 million because of these completely phony “IRS agents.”

Scams are akin to the old whack-a-mole game or, to put an even finer point on it, a Lernaean hydra — cut one of them down, and two more will spring forth. In fact, around the same time police were raiding the bogus call centers, reports had surfaced that there was a new IRS scam in town: Fraudsters have started to send out notices about fake IRS tax bills related to the Affordable Care Act via email and traditional snail mail in an effort to meet their, ahem, sales goals.

What you can do

You should stay vigilant because it’s about to get significantly more difficult to avoid getting got. The IRS announced it’s going to begin using private collection firms to handle overdue federal tax debt, a change that could effectively throw the one-step method of avoiding phony IRS agents — hang up the phone! — out the window.

The IRS has yet to make it completely clear whether it’s going to allow the collection firms it’s hired to call debtors directly. But even with this significant change, there will be a few dead giveaways that there’s a scammer on the other end of the line.

  1. If you do owe Uncle Sam, you’ll have received a bill in the mail, and should you be one of the more unfortunate ones turned over to a legitimate collector, you’ll also get written notice that your debt has been transferred over to one of its collection firms: CBE Group, Conserve, Performant and Pioneer.
  2. You’ll be allowed to make your payments online at IRS.gov/PayYourTaxBill, so, if you’re not being told about this option, hang up and notify the IRS.
  3. Payments by check should be made to the “U.S. Treasury.” If you’re being asked to write one made payable to the collector or even the IRS (which can easily be altered to read “MRS.”), hang up the phone.
  4. There will never be any threat involving police or marshals or prison.

Other ways to protect yourself

Here is the toll-free number for the IRS: 800-829-1040. If you get even the slightest inkling that someone is trying to swindle you, hang up and immediately call the agency.

See also: New Worry on ID Theft: Tax Fraud  

If you get an email that looks like it is coming from the IRS about a tax bill, do not click on any links (which could be malware designed to infect and infiltrate your computer system and steal any payment or personal information it can get its hands on). Instead, forward the email to phishing@irs.gov and wait patiently for someone to contact you about its validity.

What to do if you’re a victim

If you think you’ve already been had, well, then you’ve got some work to do. Report the crime to your local police, file a complaint with the Federal Trade Commission and call the IRS at the number provided above to find out if you really owe them money. Contact TIGTA to report the call either at 800-366-4484 or by using its IRS Impersonation Scam Reporting website. And then rely heavily on the three Ms I outline in my book, Swiped: How to Protect Yourself in a World Full of Scammers, Phishers and Identity Thieves:

  1. Minimize your exposure to fraud: If you did turn over your most sensitive personal information, request that a fraud alert be put on your credit file by all three credit bureaus — Equifax, Experian and TransUnion. You need only contact one, and it will electronically notify the other two. You might also consider a credit freeze, which is more comprehensive but cumbersome because you need to notify each credit bureau individually; lockdown of your credit report prevents thieves from opening new accounts in your name.
  2. Monitor your accounts. You might wish to purchase a combination credit and fraud monitoring service, which provides instant alerts if someone tries to open up lines of credit. You also may consider enrolling in transactional monitoring programs offered for free by banks, credit unions and credit card companies that notify you of any activity in your accounts. At the very least, keep an eye on your credit yourself. You can do this by pulling your credit reports for free each year at AnnualCreditReport.com and viewing two of your credit scores for free, updated every two weeks on Credit.com.
  3. Manage the damage. Close any account that has been tampered with or opened by a fraudster without your permission. And if you gave them the veritable skeleton key to your finances — your Social Security number — be sure to notify the IRS, do all of the above and file your taxes as early as possible next year to preclude anyone from getting their grubby little fingers on your refund.

Remember, it’s not just the phony taxman you have to worry about whenever you pick up the phone. Fraudsters come in all shapes and sizes, and, no matter how many scam centers authorities put out of business, the ultimate guardian of the consumer is the consumer (i.e., you)! Stay vigilant. While identity theft may be the third certainty in life, with a little luck you can make it that much harder for fraudsters to get you in their maw.

This post originally appeared on ThirdCertainty.

Full disclosure: IDT911 sponsors ThirdCertainty. This story originated as an Op/Ed contribution to Credit.com and does not necessarily represent the views of the company or its partners.

More on identity theft:
Identity Theft: What You Need to Know
3 Dumb Things You Can Do With Email
How Can You Tell If Your Identity Has Been Stolen?

Expect More Cyber Turbulence in 2016

In February 2015, Anthem, the nation’s second-largest health care insurer, disclosed losing records for 80 million employees, customers and partners. That was followed a few weeks later by Premera Blue Cross admitting it lost records for 11 million people.

Then in July 2015, the U.S. Office of Personnel Management began a series of mea culpas. OPM ultimately conceded that hackers swiped sensitive personnel records for 21.5 million federal employees, contractors and their family members. Anthem, Premera Blue Cross and OPM were among the high-profile breaches in a year when the Identity Theft Resource Center counted more than 750 publicly disclosed data leaks.

ThirdCertainty asked three IDT911 experts — Brian Huntley, Eduard Goodman and Victor Searcy — for their 2016 prognostications. (Full disclosure: IDT911 underwrites ThirdCertainty.)

Wire fraud and politics 

Brian Huntley, IDT911 Chief Information Security Officer
Brian Huntley, IDT911 Chief Information Security Officer

 

Huntley: In the coming year, fraud and theft will plague the merchant payments and ACH wire transfer systems. Small and medium-size businesses are especially vulnerable. If enough SMBs get victimized, it could result in a public outcry about the inherent vulnerabilities in these systems, especially as consumers and small business owners come to realize there is minimal regulatory protections in these types of cases.

This being an election year, U.S. presidential candidates will focus on cyber war strategy and armament. Armchair quarterbacking of the 2015 U.S.-China cybersecurity agreement will arise as the centerpiece of this debate. We could see the U.S.-China cyber accord ascend as the basis for peer agreements between other nation states.

Meanwhile, the search will continue in different industries for an information security control framework that is akin to what the financial services sector has in the Federal Financial Institutions Examination Council’s (FFIEC) Information Security Guidelines and the health care sector has in the Health Insurance Portability and Accountability Act (HIPAA) of 1996.

Data tranfers and children’s privacy

Eduard Goodman, IDT911 Chief Privacy Officer
Eduard Goodman, IDT911 Chief Privacy Officer

 

Goodman: U.S. companies with a European presence will encounter a tremendous amount of uncertainty in 2016 with respect to Europe’s stricter Safe Harbor data privacy rules, relating to the sensitive data transfers to businesses in the U.S.

European regulators can be expected to harass the likes of Facebook and Google. And the threat of sanctions for noncompliance with Europe’s tougher Safe Harbor standards could easily filter down to many smaller companies, as well.

In another area, the recent hacking of toy maker VTech and Hello Kitty parent company SanrioTown.com signals that the theft of children’s information could become a worrisome new trend. As children obtain earlier access to social media, smartphones and Web-enabled toys, details of their personal information and preferences are rapidly becoming part of the greater data ecosystem.

As a result, we will see more breaches that involve the theft of information for individuals under the age of 18. Hopefully, we also will see more public dialogue about the concept of preserving children’s privacy, whether it be school record data, health information or data files containing images, video and audio recordings.

Taxpayers targeted—once again

Victor Searcy, IDT911 Director of Fraud Operations
Victor Searcy, IDT911 Director of Fraud Operations

 

Searcy: One of the most pervasive identity theft scams involves the filing of a faked federal tax return using an ill-gotten Social Security number. Sadly, this will continue to be true again in 2016.

In the 2010 and 2011 tax seasons, the Internal Revenue Service paid out $8.8 billion of taxpayer money to identity thieves. And statistics pulled from a sampling of customers assisted through IDT911’s Resolution Center in 2014 show a 120% increase in tax fraud victims in 2014 and another 134% increase in 2015.

We expect this number to grow again in 2016. It can take months for a victim to sort out the mess with the IRS. Worse, there is little stopping criminals from using a victim’s Social Security number and other personal information in other scams.

IDT911 stats show that 16% of tax fraud victims also were victims of financial identity theft; 12% of customers experienced multiyear tax fraud; and 16% were victims of both federal and state tax fraud.

New Worry on ID Theft: Tax Fraud

Statistics on identity theft show that tax-related fraud causes billions of dollars of financial harm, but tax fraud assistance may or may not be included in identity theft protection products. For comprehensive coverage, an identity theft protection service must include tax fraud assistance.

What is tax fraud?

Instances of tax fraud could involve…

  • Phone scams where thieves pretend to be the IRS calling for money or information
  • Phishing scams where fraudsters send fake IRS emails or set up unsolicited websites to get money or information
  • Criminals using false information or a taxpayer’s stolen information to file fraudulent tax returns, thereby getting the victim’s refund
  • Dishonest tax preparers who defraud their clients with false deductions, inflated expenses or the like

How common is tax fraud?

Every tax season – and all the months in between – the U.S. Treasury Inspector General for Tax Administration (TIGTA) deals with dishonest tax-related schemes. The TIGTA has received well over 90,000 complaints about IRS phone scams and found that victims have lost approximately $5 million.

In 2013, the Federal Trade Commission (FTC) received 1,455,146 identity theft complaints – a third of which stemmed from tax-related fraud. In 2014, the FTC’s 1.5 million fraud-related complaints revealed that consumers have paid a total of $1.7 billion because of fraud, and a third of those complaints were also tax-related.

Fake tax returns cause problems, as well: $4 billion of tax refunds went to fraudsters after they sent in fake tax returns to the IRS.

How do identity theft protection plans address tax fraud?

Unfortunately, not many products provide services specifically geared toward preventing tax fraud. Common features, like credit monitoring, are less likely to catch these kinds of crimes because tax information is not connected to the main credit activity being monitored.

Another reason for lack of tax fraud assistance could be strict limitations on a third party’s ability to communicate with the IRS. The IRS requires that anyone communicating with it on a victim’s behalf must have IRS-approved credentials (e.g. enrolled agent, certified tax preparer or certified public accountant).

The upkeep of a tax fraud assistance division can get expensive, as well. A significant amount of time and money are needed for finding approved specialists, giving them the time to work through each case and maintaining the correct credentials. Some certifications involve continuing education, periodic renewal fees that can really add up and purchasing and maintaining a tax preparer bond in the thousands of dollars.

Despite limited capabilities to detect that a member is a victim of tax fraud or act on a victim’s behalf with the IRS, a specialist could still assist victims by guiding them on what to do next and giving them the necessary resources to carry out the steps themselves.

How can you avoid tax fraud?

First, whether it’s on your own or through an identity theft protection plan, tap into resources about how to avoid victimization. For example, learn how to pick a reliable tax preparer and how to handle tax documents with confidential information.

Second, make sure your protection plan includes Social Security number (SSN) monitoring because your SSN is a key piece of information that the IRS uses to confirm your tax return actually came from you. In some instances, if a taxpayer’s SSN is at risk, the IRS will issue a special PIN number that differentiates the taxpayer’s real tax return from the thief’s fake ones.

Third is tax fraud assistance, which provides access to professionals who will help victims report the crime and address the resulting issues. Victims of tax scams deal with the same burden of significant financial losses and rebuilding reputations that accompany any other kind of fraud. Support from people who are familiar with both the tax system and identity theft recovery will give victims direction and help them take action.

Taxes are already frustrating for many, so adding the problem of identity theft only aggravates the situation. The statistics prove that tax fraud is relevant and must be taken into account when building security against identity theft and fraudulent activity.

My Employee Is a Victim! Now What?

The difference between a victim of identity theft who does have coverage and a victim who doesn’t is monumental, and the costs (time, money, health) affect not only the victim but also his productivity in the workplace. It is vital that an employer understands the necessity of an identity theft protection plan, and which types of services and features should be included, so employees have access to the resources they need for timely and sufficient assistance.

How does identity theft affect the victim?

Identity theft affects more and more people every minute; in fact, every two seconds someone becomes a victim. The financial consequences of this growing threat can’t be ignored:

  • Over the last couple years, roughly $45 billion has been lost because of identity theft.
  • Fraud ends up costing companies three times as much as what was initially stolen.

Thieves not only steal people’s information and money but their time, as well. Close to a third of identity theft victims spend a month or more trying to resolve the issues, and a lengthy recovery process takes a toll on victims’ health:

What does identity theft have to do with productivity?

Identity theft can distract victims and affect their levels of productivity at work.

If identity theft causes such severe stress, and the recovery process takes months to complete, imagine how many workers are distracted or absent because they’re dealing with fraud, and imagine what that’s doing to their company’s bottom line.

How can identity theft protection products help?

Catching identity theft before it gets out of hand, and getting quality support, can help cut costs. Say a thief steals someone’s personal information and tries to reset her bank password. If the victim has a protection plan that includes high-risk transaction monitoring, that feature would catch the transaction as it is occurring and could prevent it from going through. If the victim doesn’t have that kind of alert system, she may not even find out about the issue until the thief has already drained the account.

There are different kinds of monitoring available, and each type covers a different group of data points. The most common are credit monitoring (for credit-related activity) and identity monitoring (for personal information). Other features could include watching high-risk transactions, assistance with tax fraud and medical identity theft cases and data sweeps.

Assistance during the recovery process can also lessen distress and distraction. If victims have access to a Certified Identity Theft Risk Management Specialist (or someone with comparable experience) who can give them an immediate action plan and actually take on some of the recovery tasks, victims can recover more quickly, which means decreased absenteeism and financial losses.

Over the past year, 70% of companies suffered from fraud. The threat is real, and the consequences are deep, but they can be subdued if employees have a coverage plan with support for victims and protection against future attacks.

The Cost of Fraud in the Workplace

Identity theft in the workplace and the expensive consequences are affecting more and more companies each year. One in three businesses were affected by data breaches last year, and the number of identity theft victims continues to grow. As the threat increases, it’s important to understand how identity theft happens, how it affects a company and its employees and what an employer can do to help.

How does identity theft happen?

Or better yet, how do thieves get information? Common ways include the following:

  • A dishonest employer/employee stealing information from coworkers (97% of cases, reported by companies that were fraud victims and uncovered the responsible party, were inside jobs.)
  • Hacking company databases or installing malware
  • Phishing – sending fake emails or setting up unsolicited websites/pop-up windows to get information from unsuspecting victims
  • Phone scams (40% of fraud complaints noted that the fraudsters contacted them via phone.)
  • Going through the mail or trash

There are plenty of ways that a thief uses newfound treasures. A few examples are…

  • Filing fraudulent tax returns to get the victims’ refunds
  • Bypassing security questions to access bank accounts, etc.
  • Getting healthcare through a victim’s insurance
  • Opening lines of credit, obtaining loans, leases, etc.
  • Selling the information to other thieves

How does identity theft affect the employee?

Employees who become victims of identity theft must deal with all kinds of consequences. They’ve lost their sense of safety and privacy and probably have significant financial losses. It all adds up to major stress and lots of work, which means employees are going to be heavily distracted at their jobs.

Identity theft also brings major financial setbacks. Millions of victims are suffering from the billions of dollars lost to identity theft over the last couple years, and it doesn’t help that one in four workers already deal with major financial distress on a daily basis, whether they’re a victim or not.

How does identity theft affect the employer?

Identity theft hits every kind of business, robbing companies of their private information, revealing their private information and decreasing their levels of productivity.

Fraud repercussions decrease employee productivity and eat away at company revenue. Unfortunately, every industry is vulnerable.

How can the employer help?

A good way for employers to keep their companies safe from the consequences of identity theft is to incorporate an identity theft prevention and recovery service into the employees’ benefits program. Features could include continual monitoring, assistance for addressing suspicious activity and resources that help with resolution.

Identity theft protection plans with 24/7 monitoring of credit activity and personal information will help reveal fraudulent activity before it causes significant damage. Likewise, a product that provides assistance and resources for the recovery process can help alleviate some of the stress that victimized employees feel, because they have professional guidance and support for tackling all of the necessary tasks.

All employers have a reason to consider what kind of protection and coverage is currently available for their employees. More and more companies are affected each year, and the health and financial costs should be enough to push employers toward getting a solution.