This Sneaky Scam Puts Your Tax Refund at Risk

A growing number of taxpayers are potentially falling victim to a new twist on an old scam. Here's how to protect your refund money.

This Sneaky Scam Puts Your Tax Refund at Risk Photo by hafizi / Shutterstock.com

The IRS is warning taxpayers about a new scam that is “quickly growing.”

The scheme emerged soon after the start of the tax filing season. Within a few days, the number of potential victims had jumped from a few hundred to several thousand, according to the IRS.

The scam

The scammers are going after tax refunds by filing fraudulent tax returns — but with a new twist. Instead of redirecting the refund money to their own bank accounts, scammers let the money go into taxpayers’ bank accounts.

Then, the scammers try to trick taxpayers into sending the money to them. The crooks use various techniques to this end, the IRS explains:

  • “In one version of the scam, criminals posing as debt collection agency officials acting on behalf of the IRS contacted the taxpayers to say a refund was deposited in error, and they asked the taxpayers to forward the money to their collection agency.”
  • “In another version, the taxpayer who received the erroneous refund gets an automated call with a recorded voice saying he is from the IRS and threatens the taxpayer with criminal fraud charges, an arrest warrant and a ‘blacklisting’ of their Social Security number. The recorded voice gives the taxpayer a case number and a telephone number to call to return the refund.”

The IRS also notes the scam could evolve further.

The takeaway

The taxpayer data that these fraudsters are using to file fake tax returns was stolen from the computers of tax professionals, the IRS says.

In fact, the agency cautioned tax pros about the scam more than a week before the IRS warned taxpayers that the scam is growing.

So, prevention of this type of scam depends largely on the tax pros and their cybersecurity measures. Once cybercriminals have breached computers and stolen your sensitive information, there’s little you can do to stop them from using your data fraudulently. You can take steps to stop them from stealing your tax refund, however.

Filing your taxes early is one of the best ways to ensure you claim your refund before a crook does.

Beyond that, be aware of the latest tax scams so you can recognize them and thus better avoid becoming a victim. Start by checking out:

If you fall victim to the latest tax scam, though, the IRS advises that you:

What’s your take on this news? Sound off below or on our Facebook page.

Karla Bowsher
Karla Bowsher
I’m a freelance journalist and former newspaper reporter who has covered both personal and public finance. I've worked for a top 50 major metro daily and a community newspaper as well as ... More

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