BBB of Upstate SC warns consumers about tax scams

It’s tax time and scammers are hard at work. Among the most stubborn cons out there, tax scammers reappear often, each time with a slightly different spin. The main theme is scammers posing as the Internal Revenue Service (IRS) in the U.S. or as the Canada Revenue Agency (CRA) in Canada and trying to trick you into either paying up or sharing personal information.

How the Scam Works

These scams most often start with a phone call and take two basic forms. In the first version, the IRS or CRA “agent” says you owe back taxes and pressures you into paying by prepaid debit card or wire transfer. If you don’t comply, the scammer threatens you with arrest and fines.

In the other version, scammers claim they are issuing tax refunds and ask you for personal information so that they can send your refund. This information can later be used for identity theft.

Scammers also use this approach to target college students by claiming a “federal student tax” has not been paid.

These imposters often go to great lengths to appear real. The scammer may give a fake badge number and name. Your Caller ID may look like the call is coming from Washington, D.C. or Ottawa. Con artists sometimes follow up scam calls with an email, which uses the IRS logo, colors, and official-sounding language.

In many instances, these scams start with a serious and official sounding “robocall” recording.

Tips to Spot This Scam

You are pressured to act quickly. Scammers typically try to push you into action before you have time to think. The IRS and CRA will give you the chance to ask questions or appeal what you owe. Also, their first contact with you will always be by mail, not phone or email.

Payment must be made by wire transfer, prepaid debit card, or other non-traditional payment methods. These methods are largely untraceable and non-reversible. The IRS and CRA will never demand immediate payment, require a specific form of payment, or ask for credit card or debt card numbers over the phone.

In the U.S., the IRS may call you about outstanding debts after reaching out by mail. Click here for more information on how to tell if the IRS is really calling or if you are talking to a scammer.

Tax Identity Theft

Another tax scam to look out for is tax identity theft. This occurs when a scammer uses your government-issued identity number (Social Security number in the U.S. or Social Insurance number in Canada) to file a tax return in your name and collect your refund. It can also be someone using your information to get a job.

Consumers don’t usually realize they have been victims of tax identity theft until they get a written notice from the IRS or CRA saying that more than one tax return was filed, or they were paid by an employer they don’t know.

The best way to avoid tax identity theft is to file your taxes as early as possible, before a scammer has the chance to use your information to file a fake return.

In the U.S., you can get an Identity Protection PIN (IP PIN) from the IRS before you file your tax return. This is a six-digit number, which, in addition to your Social Security number, confirms your identity.

It is important to note that you cannot opt-out once you get an IP PIN. Once you apply, you must provide the IP Pin each year when you file your federal tax returns. The IRS will provide your IP PIN online and then send you a new IP PIN each December by postal mail.

If you are the victim of tax identity theft in the U.S., contact the IRS at 1-800-908-4490. You should also file a complaint with the Federal Trade Commission (FTC) at ftc.gov/complaint or by calling 1-877-FTC-HELP. The FTC also offers a personalized identity theft recovery plan at identitytheft.gov.

If you are a victim in Canada, contact your local police service. If you believe your Canadian Social Insurance Number has been stolen, contact Service Canada at 1-800-206-7218.

Refund Advances
Some tax preparers offer Refund Advances, which are essentially short-term loans in the amount of your expected tax return, less the tax preparation cost. The upside of these loans is that you can get the money right away. However, you should consider whether receiving your refund a couple of weeks sooner is worth the cost of the tax preparation service. Also look out for large deductions from the refund amount to cover fees.
To report a tax scam, go to BBB Scam Tracker.

About the Author

Vee Daniel is President & CEO of the Better Business Bureau Upstate SC. Prior to joining the BBB, Daniel served as Director of Events & Membership Services for the Home Builders Association of South Carolina and Executive Officer of the Home Builders Association of Greater Spartanburg.