Five common questions about tax scams
According to the Internal Revenue Service (IRS), thousands of people have fallen victim to tax scams and fake IRS communication in recent years, collectively losing millions of dollars in the process. And scammers often target seniors, attempting to steal hard-earned savings and retirement money. With Tax Day right around the corner, now is the perfect time to take the necessary steps to protect yourself and your loved ones from potential scams.
Not sure where to start? As the adage goes, the more you know, the more you can control. Holiday Retirement recently sat down with E. Elizabeth Loewy, general counsel at EverSafe, a technology company focused on the prevention of fraud and identity theft in later life, to ask five common questions seniors and caregivers have about tax season scams.
Holiday Retirement: Why is tax season a dangerous time for seniors and their finances?
Elizabeth Loewy: Tax season can be dangerous for anyone—not just seniors. Scammers have become quite sophisticated in the ways they go about defrauding potential victims.
And it’s true that older adults often make good targets. Some may have lost a spouse who took care of the bills and taxes, and they don’t have a sounding board whom they can consult about calls from purported IRS agents. Others may face cognitive challenges that affect their financial capacity. Scammers are very good at finding these victims. And a threatening call from the IRS, demanding personal information or money, can be very frightening.
Holiday: What are the most common tax season scams targeting seniors?
EL: The most common tax scam involves fraudsters who steal a victim’s personal information and Social Security number, and then use it to file a bogus tax return. The motivation, of course, is to get a fraudulent refund. The victims may not learn about the scam until they file their taxes and are notified by the IRS that they already filed and/or that foul play is suspected.
Other scams are variations on that theme. A call from a purported IRS agent may claim that the taxpayer owes additional taxes from the preceding year, or that they are the subject of an audit or an investigation. The scammers often get aggressive if there is resistance, threatening that the police or federal marshals will be called in or that litigation will ensue. Another variation of the scam is a fraudster’s contention that the IRS made an error and owes the taxpayer a bigger refund. In order to send that refund, of course, the taxpayer’s Social Security number must be “confirmed” (i.e., stolen), which the scammer then uses to file phony returns or steal from other financial accounts.
Holiday: What can seniors (and/or their loved ones) do to protect their finances when filing?
EL: Seniors and their loved ones can take steps to prevent exploitation and tax-related identity theft. Educating family members about tax scams is the first line of defense. Seniors should be reminded that the IRS never calls, emails or sends text messages to communicate with taxpayers. At EverSafe, we recommend filing early, as scammers know that if they submit false returns early, they may have a better shot at “beating” the legitimate taxpayer to their refund.
Of course, monitoring all of a taxpayer’s financial accounts, including savings, checking, investment and credit card accounts — as well as their credit reports — is the best way to protect their finances and their identity. The sooner a potential issue is identified, the sooner it can be addressed. If credit reports are only viewed once a year, an identity thief has several months to cause havoc. EverSafe is a digital service for caregivers that enables them to monitor loved ones’ financial accounts and their credit reports daily for any signs of erratic activity, including tax fraud and other sophisticated scams. Caregivers, as well as senior members, receive alerts at the first sign of suspicious transactions.
Holiday: What should seniors do if they suspect that they’ve been a victim of a fraudulent tax scam?
EL: If a taxpayer has reason to believe that he or she is the victim of tax fraud, the first step is to make sure that any communications that appear to be from the IRS are legitimate. Even written communications should be scrutinized to ensure that they are not a phishing attempt. The IRS should be notified immediately, and the caller should make that call using official IRS contact information.
A fraud alert can be placed on the victim’s credit reports, by contacting one of the credit bureaus (Equifax, Experian or TransUnion). If the individual does not intend to apply for any new credit cards or take out any loans, the victim can alternatively place a credit freeze on their credit file.
All of the victim’s financial institutions should also be contacted, especially if there is reason to believe that personal information has been stolen. A system for monitoring the victim’s credit reports and financial accounts should be implemented so that further damage can be shut down immediately. The aggrieved senior can visit irs.gov/uac/taxpayer-guide-to-identity-theft, where there are additional directions on how to resolve identity theft related to a tax scheme.
Holiday: How can seniors (and/or their loved ones) recognize a tax scam?
EL: There are a few warning signs that suggest that an individual may have been the target of a tax scam. The IRS references red flags that indicate that an individual may have been the victim of tax-related identity theft. They include communications from the IRS or a tax professional that
a) more than one tax return was filed using the senior’s Social Security number,
b) the taxpayer owes additional taxes, a refund offset (for a reduced refund), or has been the subject of a collection proceeding for previous unpaid taxes, or
c) IRS records indicate that he or she received wages from an employer for whom the taxpayer never worked.
Any communication, including written ones, that threaten arrest — if there has been no prior contact — should be viewed with suspicion.
The bottom line? Seniors should be encouraged to monitor all their financial accounts and credit reports and keep in close contact with trusted friends, family members or professionals if they have any questions about purported communications from the IRS.
Holiday Retirement residents receive helpful tips and information about scam protection and fraud prevention year-round. Get in touch with us today to learn more.