Latest tax scam twist: crooks deposit fraudulent refunds into real taxpayers' bank accounts
Tuesday, February 13, 2018
Your tax refund showed up in your bank account! Party time, right?
Wrong. It's possible that the money isn't really connected to your filing. It could be part of a new tax scam that's appeared this filing season.
And crooks are using even more chicanery to get the money that's in your account, from posing (once again) as Internal Revenue Service agents to pretending to be debt collectors (you knew this would eventually happen).
But before this latest effort to steal your tax refund got to this point, it started with stealing your tax identity.
Here's the tax tale in four acts steps.
Step 1: Tax preparers targeted
Earlier in February, the IRS alerted tax preparers of a new scam that begins with cybercriminals stealing data from practitioners' computers and filing fraudulent tax returns.
Generally, criminals use alternative ways to get the fraudulent refunds delivered to themselves rather than the real taxpayers.
However, in this latest scam variation, some of the criminals have the money sent to the real bank accounts using the info stolen from the tax preparers' data bases.
I know. Criminally speaking, it sounds counterproductive. And in the past when this happened, it was a screw-up by the crooks.
But in the years that they've been refining their tax identity theft techniques, thieves have learned that it's more difficult for the IRS to identify and halt fraudulent tax returns when the filings use real taxpayer data, such as income, dependents, credits and deductions.
And following through on that approach, instead of sending the refund to an unrelated account or address that could prompt the IRS to take a closer look, they let the money go to the real bank destination.
Step 2: Crooks reclaiming refunds
That's where the next twist of the tax scam, the impersonation portion, comes into play.
So far, the IRS has learned of two ways the crooks go about recovering the fake refunds they generated and sent to real taxpayers.
In some cases, criminals pose as debt collection agency officials who are acting on behalf of the IRS. Again, not to gloat, but we knew this was going to happen.
In that guise, they contact taxpayers to say a refund was deposited in error. The criminal caller then instructs the taxpayer to forward the money to the fake collection agency.
In another version, the taxpayer who received the erroneous refund gets an automated call with a recorded voice identifies him/herself as an IRS agent. As in the previous iteration of this pervasive (and costly) tax call scheme, the fake IRS agent threatens the taxpayer with criminal fraud charges, an arrest warrant and/or a blacklisting of the person's Social Security number. The recorded voice gives the taxpayer a case number and a telephone number to call to return the refund.
Step 3: Cleaning up after the erroneous refund scam
If a tax refund amount shows up in your bank account and you haven't yet filed your tax return, don't panic.
Yes, it looks like your tax identity has been stolen. So immediately contact the IRS about the steps you need to take to get your taxpaying life back on track.
First, contact the IRS Identity Protection Specialized Unit (IPSU) toll-free at (800) 908-4490. You'll also need to fill out the IRS Identity Theft Affidavit, Form 14039.
You also need to talk with your financial institution. Since crooks have you account number, you probably should close those accounts or take other protective steps recommended by your bank.
And you'll definitely want to talk to your tax preparer since that might be the place from where the crooks got your data.
The Federal Trade Commission (FTC) also has an ID theft recovery plan to help you dig out of this mess.
The first step is to place a free, 90-day fraud alert on your accounts by contacting one of the three credit bureaus. That company must tell the other two.
The fraud alert will make it harder for someone to open new accounts in your name. As for your existing accounts, you also need to request a credit report to see what other possible fraudulent activity might have taken place there.
Step 4: Returning the wrong refund
Now about that fake tax refund money that you received. You use the same steps to take care of a fraudulent tax refund as you do to deal with a real erroneous return, which just happens to be today's Daily Tax Tip.
If the erroneous refund showed up as a direct deposit, you should:
- Contact the Automated Clearing House (ACH) department of the bank/financial institution where the direct deposit was received and have them return the refund to the IRS.
- Call the IRS toll-free at (800) 829-1040 (individual) or (800) 829-4933 (business) to explain why the direct deposit is being returned.
If the erroneous refund was a paper check and you haven't cashed it:
- Write "Void" in the endorsement section on the back of the check.
- Submit the check immediately to the appropriate IRS location based on the city (possibly abbreviated) on the bottom text line in front of the words TAX REFUND on your refund check. They are:
ANDOVER – Internal Revenue Service, 310 Lowell Street, Andover, MA 01810
ATLANTA – Internal Revenue Service, 4800 Buford Highway, Chamblee, GA 30341
AUSTIN – Internal Revenue Service, 3651 South Interregional Highway 35, Austin, TX 78741
BRKHAVN (Brookhaven) – Internal Revenue Service, 5000 Corporate Ct., Holtsville, NY 11742
CNCNATI (Cincinnati) – Internal Revenue Service, 201 West Rivercenter Blvd., Covington, KY 41011
FRESNO – Internal Revenue Service, 5045 East Butler Avenue, Fresno, CA 93727
KANS CY (Kansas City) – Internal Revenue Service, 333 W. Pershing Road, Kansas City, MO 64108-4302
MEMPHIS – Internal Revenue Service, 5333 Getwell Road, Memphis, TN 38118
OGDEN – Internal Revenue Service, 1973 Rulon White Blvd., Ogden, UT 84201
PHILA (Philadelphia) – Internal Revenue Service, 2970 Market St., Philadelphia, PA 19104
When you mail the erroneous refund back to Uncle Sam, don't staple, bend or paper clip it to anything. That includes not attaching it to the note you should include that tells the IRS "Return of erroneous refund check because …" and give a brief explanation of why you're giving back the tax cash check.
If the erroneous refund was a paper check and you have cashed it, then:
- Submit a personal check, money order, etc., immediately to the appropriate IRS location listed above.
- If you no longer have access to a copy of the check, call the IRS toll-free at (800) 829-1040 (individual) or 800-829-4933 (business) and explain to the IRS assistor that you need information to repay a cashed refund check.
- On the check/money order write "Payment of Erroneous Refund," the tax period for which the refund was issued and your taxpayer identification number (Social Security number, employer identification number or individual taxpayer identification number).
- Include a brief explanation of the reason for returning the refund.
Note that if you have to repay an erroneous refund that you cashed and/or spent, you may owe the IRS interest on the money.
That's another reason not to dally if you get a wrong refund, either due to a tax scam perpetuated in your name, or just because of a mistake.
You also might find these items of interest:
- Tax-related ID theft tops FTC's annual consumer complaint list
- Protecting your financial & tax data from Equifax (and all) hackers
- 5 ways to protect your identity (and money!) during National Tax Security Awareness Week (and year-round!)
You can follow this conversation by subscribing to the comment feed for this post.