IRS filings have secure information about you or your business. When you file with the IRS, you might be due for a refund payment. Because of this, scams are popular involving people claiming to be the IRS that are trying to collect your refund on your behalf. In this episode of MissionBusinessPodcast.com, Bernard Roesch explains common IRS scams to be aware of and how to avoid them.
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Why Scammers Collect IRS Related Information
If a scammer can gather enough information from you to file a tax return that claims you are due for a refund, then they may be able to collect the refund from the IRS.
- They do this by gathering information about your previous tax returns and other information that will be needed to file their fake return.
- They then file a return on your behalf that is similar enough to recent years to not get caught by the IRS but specifically includes a refund for this tax period.
- The IRS, if they don’t catch the issue, will then send the refund to them and you are responsible for cleaning up the process with the IRS later.
While you are not financially held to the refund sent to the scammer, the process of cleaning this up with the IRS is complicated and time consuming.
What Information Scammers Need
Scammers will ask for information related to past tax returns and information they will need to file the next tax return. For example, they may ask for income data from the last few years of your tax returns, name, address or other contact information, prior businesses and of course, tax IDs. With this information, they can create a fake return for the current time period to collect a refund.
How Scammers Get Tax Information
There are a number of ways that a scammer can get your tax information.
- For example, if you ever receive a phone call or email claiming to be the IRS and requesting this information, it’s nearly always a scam.
- The IRS contacts you via postal mail on official IRS letterhead to collect information. They normally ask you to contact them to provide information.
- Getting information directly from you is only one way that scammers get your tax information. If you use a tax preparer, it’s important to make sure their computer systems are extremely secure.
- Hackers target tax preparers to get access to large amounts of tax data for many people all at once.
- Finally, it’s important to not leave tax return information lying around. An employee or somebody else that has access to your office could see this information and make copies or pictures of the information for later use.
How The IRS is Fighting Scammers
The IRS has been scammed for many years since it has the financial information of so many people. There are a number of things the IRS is doing to combat scammers, especially in recent years.
- Much of the fraud happens due to the IRS wanting to give you refunds early if you filed your tax returns early.
- However, if they pay early, they can’t cross-reference tax return data to other fillings that you may have received, such as 1099s and W2s.
- In order to help the IRS move quicker while still having proper documentation, 1099s need to be submitted by January 31st instead of the usual March deadline so the IRS can cross-reference much sooner.
- The IRS is also delaying refunds a bit after January 31st so that it has all the info on hand to make sure they can do a legitimate review of tax information.
Be wary of anyone contacting you requesting IRS information, especially if it is not done directly through the mail from the IRS.
We Can Help You
If you need an expert, you can consult about these types of business questions and other financial aspects of running your business, contact Bernard today. You can also visit MissionBusinessPodcast.com for more insights that Bernard has been sharing with us in the previous episodes.
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