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How Tax Pros Can Protect Clients Against Scams During Tax Season

For almost the past decade, there has been an annual spike in illicit voice, and now text, communications during tax season in the United States. Truecaller’s Clayton LiaBraaten shares tips on how tax professionals can educate clients and protect them from scams.

As we go through another tax season, it’s important for tax pros to prepare clients for an uptick in fraudulent calls and scammers trying to steal personal information. It’s no surprise that we’re seeing an influx of IRS scams. Scammers often capitalize on major holidays, times of crisis, and increases in travel to exploit their victims. There has been an annual spike in illicit voice, and now text, communications during tax season in the U.S. going back almost a decade. In 2020, nearly 60 million—one in five—Americans were defrauded of $60 billion to robocalling schemes.

This type of behavior is motivated by classic consumer psychology and scams going back decades. As highly competent social engineers, fraudsters exploit people’s anxiety about the IRS to run variations of schemes. The ubiquity of mobile devices as an electronic appendage for nearly 300 million Americans makes robocalling and robotexting the most common channel for defrauding the vulnerable.

As we see an abatement of cases from the Covid-19 pandemic, where there was a material rise in fear-based schemes, the American public likely will see increased flexibility in the filing. Stimulus, deduction changes, and periods of unemployment have set the precedent for the repeated expectation of backlogs.

Given perceptions around these challenges, we expect some consumers to be even more on edge this season than usual. This will precipitate a target-rich environment for those preying on anxious taxpayers. The general sense of uncertainty stemming from recent events in Eastern Europe will only fuel uneasiness.

Unfortunately, the most vulnerable are often those least able to afford any kind of unrecoverable financial loss.

The tax professionals community should be aware of some of the types of scams we have seen or anticipate this season. Educating your clients on some of these themes, as well as some mitigation strategies, is in the best interest of the public and demonstrates the kind of expertise your clients expect.

Tax experts should alert their clients to be on the lookout for:

  • Rapid refund offers, given IRS-stated backlog—fraudulent fee-based refund accelerators.
  • Fake tax software deals—robocalls and robotexts offering low-cost or no-cost “maximum refund” software, sometimes as impostors of legitimate, popular tax software. These schemes can come in the form of toxic links or agents soliciting credit cards and contact information.
  • Extension for a fee—scammers offers to file automatic extensions for taxpayers, even promising 100% acceptance and no penalties and interest.
  • Windfall scams—investment opportunities to multiply your refund. In 2022, these can be linked to cryptocurrency scams that pose as legitimate decentralized finance exchanges.
  • Intimidation—you owe money and must pay now or be penalized, or get offered a discount with a credit card or gift card. This is harder to trace.

Not all robocalls/robotexts are direct financial fraud. They may not ask you for any payment information, because they are collecting and confirming personal information—Social Security numbers, direct deposit information, etc.—for future identity theft. This criminal ecosystem is constantly building out databases with more information about individuals and businesses to execute increasingly complex fraudulent campaigns.

Whom do the bad guys target?

  • The tax-naive, including people for whom English is a second language, as well as immigrant communities less familiar with U.S. tax law.
  • Fixed-income individuals.
  • Young adults are new to employment and the tax system.
  • Small businesses lacking accounting.

Tax professionals should ensure clients understand the IRS will never:

  • Call to demand immediate payment using a specific payment method such as a prepaid debit card, gift card, or wire transfer. Generally, the IRS will first mail a bill to any taxpayer who owes money.
  • Threaten to immediately bring in local police or other law enforcement groups to have the taxpayer arrested for not paying.
  • Demand that taxes be paid without giving taxpayers the opportunity to question or appeal the amount owed.
  • Call unexpectedly about a tax refund.

Taxpayers who receive these phone calls should:

  • Record the number and then hang up the phone immediately.
  • Report the call to the Treasury Inspector General for Tax Administration using the IRS impersonation scam reporting form or by calling 800-366-4484.
  • Report the number to phishing@irs.gov and be sure to put “IRS Phone Scam” in the subject line.

It’s most important to stay vigilant; the first line of defense is always preparedness. Once we understand the threats, we can safeguard against them. In addition, CallerID and spam-blocking apps can be an added layer of security—they’re free, they’re updated dynamically to address the scale and agility of the fraudsters, and they can protect consumers from ever being exposed to clever criminals.

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