A few months ago, the Internal Revenue Service issued a warning about an income-tax scam involving bogus telephone calls. The scammers spoof phone numbers so calls seem to come from the IRS, and recipients are told they owe a lot of taxes and must pay immediately, via a prepaid debit card or a wire transfer.
If the intended victim refuses, the scammer calls back, this time spoofing the number of the local police department or state department of motor vehicles, threatening arrest or loss of a driver's license if "fines" aren't paid.
Perhaps most disturbingly, the scammers use personal information — often the last four digits of the victim's Social Security number — to add legitimacy to the calls.
Many roads, same destination
This is a new twist on tax-related identity theft, but it is hardly the only one out there. The IRS has also warned that phishing emails claiming to be from the agency are becoming common.
The two scams may differ, but the goals are the same: getting private information about you in order to steal your identity, use your credit card, open new accounts in your name and, possibly worst of all, file false tax returns in order to collect your tax refunds.
The prevalence of these scams increases during tax season, but IRS-related scams occur throughout the year.
"The main tool IRS scam artists use is social engineering," said Bonnie Patten, executive director of TruthinAdvertising.org, a consumer-watchdog group based in Madison, Conn.
"The reason [the scams] are so effective is due to fear," Patten said. "People are afraid of the tax man, and the scammers out there know that."
Fear of being caught by the tax collector makes recent immigrants, among other groups, top targets of IRS-related scams.
"The fraudsters behind this IRS tax scams take advantage of vulnerable populations, their lack of knowledge and their fear of government agencies, to exploit and abuse [them]," Patten said.
Lack of preparedness
Most longtime U.S. residents aren't doing enough, either, to protect themselves from tax-related identity theft, according to a survey released in March by Experian's ProtectMyID identity-protection service.
The ProtectMyID study found, for example, that two out of five individuals store old tax documents in unlocked places, and that half of those who file their taxes by mail do not certify their returns.
There is also a lot of sensitive data that should be private, yet is publicly available. For example, older property deeds, generally part of the public record, have Social Security numbers (SSNs) printed on them, said Bruce Provda, an New York City attorney who handles international and domestic tax-return scams.
"Scammers … also pose as legitimate investigators, skip tracers or even law-enforcement agents to get access to online databases with sensitive ID data, and just search for SSN by name," Provda said.
Steps to take
It may be impossible to hide all the personally identifiable information already in the public domain, but there are still steps everyone can take to avoid becoming the victim of tax-related identity theft.
File early. Scammers who have your Social Security number can collect your tax refund by filing a phony tax return in your name. The IRS won't realize fraud has taken place until you file. The earlier you can file your return after Jan. 1, the shorter the window of opportunity a scammer has to steal your identity and get your money.
Don't take cold calls from the IRS. If the IRS needs to contact you, it will do so via old-fashioned snail mail. The agency doesn't use social media or email to initiate contact with taxpayers, and rarely, if ever, uses the telephone. You can always verify a communication with the IRS with a simple phone call. The IRS website also provides advice on how to handle fraudulent messages.
If you file electronically, ensure the computer is secure. If you use your personal computer, keep anti-virus software up to date and use a secure Internet connection. If you use an accountant, ask about his or her security practices. Your tax preparers should not be shy about explaining what they do to keep your information safe; if they don't want to tell you, look for someone more trustworthy.
Be smart about how you store tax data. Keep tax records in a safe location. Shred old tax files before putting the paper into the recycling bin. Delete any tax data from phones and tablets, and log off any site requiring a password.
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