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What is Tax Fraud: Four Different Types

Posted on 2/5/2018 by Marcy Kilgore

Protect yourself. Be aware of tax fraud.


Tax fraud can be defined in many ways and includes when people submit false information to either reduce the amount of taxes they owe or increase a tax refund. When it involves identity theft, tax fraud is sometimes called tax-related identity theft. It occurs when your personally identifiable information (PII) is used without your permission to commit tax-related crimes or fraud. PII includes such information as your name and Social Security number. A tax fraudster who gains access to your PII can use it to file a tax return in your name, and collect a tax refund— even if you didn’t have a refund coming. It’s a fraudulent return, after all. They’ll make up the numbers, including the refund amount. The IRS has become more aggressive in targeting tax fraud and with good reason. Scammers, posing as IRS employees use emails, text messages, and phone calls to trick unwitting victims. The criminals prompt taxpayers—and even tax professionals—into unknowingly handing over personal information that could be used to commit tax fraud.



While tax-related identity theft comes in myriad forms, there are four ways it can start, usually involving obtaining a victim’s PII. Here are a handful of ways it can happen: 

·         PHISHING – Phishing occurs when fraudsters send taxpayers fake emails or website links purported to be from the IRS. The criminals’ aim is to trick would-be victims into sharing personal data. A key point to remember from the IRS itself: “The IRS doesn’t initiate contact with taxpayers by email, text messages, or social media channels to request personal or financial information. This includes requests for PIN numbers, passwords or similar access information for credit cards, banks, or other financial accounts.” 

·         PHONE FRAUD – Cyber thieves often impersonate IRS agents via telephone to steal personal information. In recent years, the IRS has reported a rise in such cases. The agency says it will never call to demand immediate payment, nor will the IRS call about taxes you owe without first having mailed you a bill. 

·         TAX PREPARER FRAUD – Tax preparer fraud occurs when clients receive emails that appear to be from their tax professional asking them to update their online accounts. 

·         PHONY IRS AGENTS VISITING A HOME – A particularly onerous form of tax fraud occurs when an identity thief visits a home (sometimes targeting an elderly resident) and claims to be an IRS agent. While IRS agents visit homes and businesses, they carry picture IDs and will try to contact you before visiting. Don’t let anyone inside your home unless you know they are who they say they are. The IRS does use private debt collection agencies, but you’d have received a letter from the IRS and the debt collection company that your case was transferred.

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