Posted by Earlier this week, the IRS warned taxpayers about a tax scam that is becoming increasingly common. The scam involves a large, fraudulent refund being deposited in a taxpayer’s own bank account.
How the Scam Works
In this scam, the perpetrators hack into a tax return preparer’s computer files to obtain a taxpayer’s personal information. They then file a fraudulent tax return in the taxpayer’s name that generates a large refund. The refund is deposited electronically by the IRS in the taxpayer’s own bank account. As soon as the deposit appears in the taxpayer’s bank account, the taxpayer is contacted by the perpetrators by telephone. In one version of the scam, the person calling pretends to be with a debt collection agency working for the IRS. The person calling states that the IRS issued an erroneous refund and demands that the taxpayer pay the amount to the alleged debt collection agency. In another version, the taxpayer receives an automated call with a recorded voice saying the message is from the IRS and threatening the taxpayer with criminal fraud charges, an arrest warrant, and a “blacklisting” of their Social Security Number if the taxpayer does not call a telephone number to return the refund.
If a taxpayer pays the refund to the scammers, the matter will take some time to resolve. The IRS’s records will show that the refund, which was generated by a fraudulent return, was deposited in the taxpayer’s own bank account. The taxpayer will have to convince the IRS that he or she was the victim of a scam.
What You Should Do If an Unexpected Refund Appears
If an unexpected refund appears in your bank account (or you receive it as a paper check), do not pay the money to someone who contacts you by telephone or by e-mail. First, you should determine whether this is the refund you were expecting or instead a refund generated by scammers. Talk to your tax return preparer and, if necessary, call the IRS directly. Second, if the refund is not legitimate, follow the established procedures for returning an erroneous refund to the IRS. If the refund was deposited directly into your bank account, contact your bank or financial institution and ask them to return it to the IRS. Then contact the IRS (800-829-1040) to explain why the deposit is being returned. If the refund came to you as a paper check, write “Void” in the endorsement section on the back of the check and mail it to the appropriate IRS address (see below) with a note saying “Return of erroneous refund check because (and give a brief explanation of the reason for returning the refund check).”
Other Issues
Make sure your tax return preparer is taking appropriate security measures with your information. Digital information should be stored in a secure, encrypted form. E-mailing documents back and forth to your preparer is not a secure form of communication. Your preparer should use some type of secure portal for receiving sensitive digital information from you and sharing it with you.
If you file your tax return and the IRS rejects it because a return has already been filed with your Social Security Number, contact the IRS immediately and follow the steps in the Taxpayer Guide to Identity Theft.
More Information
For more information, including the address to which you should mail an erroneous refund check, see IRS New Release 2018-27.