The IRS has recently become concerned with the proliferation of identity theft, refund fraud schemes, and scams such as "phishing." In addition to your clients’ everyday tax concerns, now they—with you leading the way—must be aware of attempts to deceive them into potential tax trouble. Illegal scams can lead to significant penalties, interest, and criminal prosecution.
In response to growing identity theft concerns, the IRS has begun a comprehensive strategy to prevent, detect, and resolve identity theft cases. In addition to a law-enforcement crackdown, the IRS has stepped up internal reviews to spot false tax returns before refunds are issued, as well as working to help victims of identity theft refund schemes.
Identity theft cases are among the most complex ones that the IRS handles, but the Service will attempt to work with taxpayers if they bring matters to its attention.
Identity thieves are trying to stay one step ahead, however. They may try to use a legitimate taxpayer’s identity and personal information to file a tax return and claim a fraudulent refund.
An IRS notice informing a taxpayer that more than one return was filed in the taxpayer’s name, or that the taxpayer received wages from an unknown employer, may be the first signal the individual receives that he or she is a victim.
The IRS has a screening process to stop fraudulent returns. While the IRS is continuing to address tax-related identity theft aggressively, it is also seeing an increase in identity crimes, including more complex schemes. In 2011, the IRS protected more than $1.4 billion of taxpayer funds from identity theft.
The IRS recently conducted a national sweep, cracking down on suspected identity theft perpetrators as part of a stepped-up effort against refund fraud and identity theft. Working with the Justice Department’s Tax Division and local U.S. Attorneys’ offices, the nationwide effort targeted 105 people in 23 states.
Anyone who believes his or her personal information has been stolen and used for tax purposes should immediately contact the IRS Identity Protection Specialized Unit.
And if you’re not aware of ‘phishing,’ it’s a scam typically carried out with the help of unsolicited email or a fake website. Armed with a taxpayer’s personal information, a criminal can then commit identity theft or financial theft.
The IRS does not initiate contact with taxpayers by email, text messaging or social media to request personal or financial information from taxpayers.