MARCH 3, 2018

IRS Warns of New Tax Refund Scam

by HFC Staff

It’s tax season and the Internal Revenue Service (IRS) is warning taxpayers about a new - and growing - scam involving erroneous tax refunds being deposited into real taxpayer bank accounts. Then the crooks use various tactics to con taxpayers into turning over the funds.

The IRS says it’s a new twist on an old scam. The difference? Unlike previous variations on the scams,

there is "proof" that the call from the alleged IRS representative is for real: The taxpayer typically does have a bogus tax refund in his or her bank account.

How it works. Thieves are using phishing and other schemes to steal client data from tax professionals. Then, using that data, they file fraudulent tax returns and use the taxpayers' real bank accounts to deposit erroneous tax refunds. Finally, the thieves, posing as IRS or other law enforcement, call attention to the error and ask taxpayers to return the money to them.

To get the funds from real taxpayers, thieves use various tactics. In one version, criminals posing as debt collection agency officials acting on behalf of the IRS reach out to taxpayers to say a refund was deposited in error, and ask the taxpayers to forward the money to their collection agency.

In another version, taxpayers who receive an erroneous tax refund receive an automated call with a recorded voice claiming to be from IRS; the caller threatens taxpayers with criminal fraud charges, an arrest warrant and a “blacklisting” of their Social Security number. The recorded voice then gives the taxpayer a case number and a telephone number to call to return the refund.

"It's super-sophisticated," said Luis Garcia, a spokesperson for the IRS In Detroit.

"If you haven't filed your taxes — especially if you're not expecting a refund — and money shows up in your account, don't touch it."

Taxpayers who file electronically may find that their tax return is booted back because a tax return with their Social Security number has already been filed. In that event, follow the steps outlined in the Taxpayer Guide to Identity Theft. Taxpayers who are not able to file electronically should mail a paper tax return along with form 14039, Identity Theft Affidavit (downloads as a pdf), with a statement that they were victims of a tax preparer data breach. For more on tax-related-identity theft, click here.

The IRS warns that versions of the scam may continue to evolve. The number of potential taxpayer victims has already jumped from a few hundred to several thousand in just days. The IRS Criminal Investigation division is continuing its investigation into the scope and breadth of this scheme.

Many times, scammers try to use direct deposit. But some could have a fraudulent refund check mailed to your home. They're hoping you cash it — and don't spend it — and then hand over the money. Or maybe they're planning to steal that check out of your mailbox.

If this happens to you - and you do have a bogus tax refund in your bank account - here's how the IRS wants you to return the funds and avoid being scammed:

If the erroneous refund was a direct deposit:

*Contact the Automated Clearing House (ACH) department of the bank/financial institution where the direct deposit was received and have them return the refund to the IRS.

*Call the IRS toll-free at 1.800.829.1040 (individual) or 1.800.829.4933 (business) to explain why the direct deposit is being returned.

If the erroneous refund was a paper check and hasn't been cashed:

*Write "Void" in the endorsement section on the back of the check.

*Submit the check immediately to the appropriate IRS location listed below. The location is based on the city (possibly abbreviated) on the bottom text line in front of the words TAX REFUND on your refund check. Don't staple, bend, or paper clip the check.

*Include a note stating, "Return of erroneous refund check because (and give a brief explanation of the reason for returning the refund check)."

If the erroneous refund was a paper check and you have cashed it:

*Submit a personal check, money order, etc., immediately to the appropriate IRS location listed below.

If you no longer have access to a copy of the check, call the IRS toll-free at 1.800.829.1040 (individual) or 1.800.829.4933 (business) (see telephone and local assistance for hours of operation) and explain to the IRS representative that you need information to repay a cashed refund check.

*Write on the check/money order: Payment of Erroneous Refund, the tax period for which the refund was issued, and your taxpayer identification number (SSN, EIN, or ITIN).

*Include a brief explanation of the reason for returning the refund.

Act quickly: Repaying an erroneous refund in this manner may result in interest owed to the IRS (remember, it's not your money to begin with).

In addition to returning the erroneous tax return, the IRS encourages taxpayers to discuss the issue with their financial institutions. Since the bad guys have access to your bank accounts, there may be a need to close those accounts. Taxpayers receiving erroneous refunds should immediately should contact their tax preparers.

The IRS reported that cybercriminals had been targeting tax professionals. According to the IRS, there were 177 tax professionals or firms that reported data thefts involving client information relating to thousands of tax filers from January 2017 through May 2017. Much of that theft started with a phishing e-mail sent to the tax professional posing as a potential client to gain access to the professionals’ computer systems and collect the personal information of existing clients.

© 2008-2017 Hawaii Filipino Chronicle Inc.