IRS Releases Tax Scams for 2012

By Jeffery Levine, IRA Technical Expert  
Follow Me on Twitter: @IRAGuru4EdSlott

IRS released its “Dirty Dozen Tax Scams for 2012” on February 16, 2012. Number one on the list this year – Identity Theft.

How can identity theft be used against you with Uncle Sam? Well, let me ask you this… How many of you expect to receive refunds this year? If you are, that’s great, but someone else might be expecting to receive your refund first. And no, I’m not talking about someone raiding your mailbox and stealing your refund check – although that’s certainly a possibility as well. I’m talking about someone else filing their version of “your” tax return, and getting a refund.

You might be asking yourself, “But how on earth would someone else have access to all my tax information – my 1099’s, my W-2’s, etc.” They generally won’t, but that doesn’t matter. They just need certain basic information like your name and social security number. The rest can be made up. For instance, maybe “you” had a lot of medical expenses this year, or maybe “you” donated a large sum of money to charity. Or perhaps “you” are entitled to a refund eligible credit like the earned income tax credit. There are a lot of things “you” might claim that you never did, have and or qualify for, if you know what I mean. And when it’s all said and done, these identity thieves can set up phony addresses to send refund checks to, or more likely, a bank account to have your refund sent electronically as soon as possible.

There’s a good chance that if you’re a victim of tax refund fraud, you won’t realize what’s happened until the real you files, or tries to file, your own real return. Chances are if someone else has already claimed a refund using your social security number, your return won’t be able to be processed, preventing you (at least for the time being) from being able to receive the real refund that the real you is entitled to.

Of course, IRS is far from complacent about this sort of thing. And it’s not hard to see why. In recent years, the Service has seen a huge spike in refund related identity thefts including a seemingly ridiculous spike of more than 500% between 2010 and 2011. In fact, in 2011 alone, IRS stopped processing on more than 250,000 returns representing more than $1.4 billion – that’s billion with a “b” – of tax refunds that would have otherwise landed in the hands of unscrupulous identity thieves.

If you are unfortunate enough to be a victim of tax refund fraud, let IRS know as soon as possible. They even have a dedicated group of people, the Identity Protection Specialized Unit, available to assist you. You can reach them at 1-800-908-4490.

Of course, not being a victim of identity theft in the first place is the best scenario, so here are some tips from IRS on how to keep your identity your own.

• Don’t give a business your SSN just because they ask. Give it only when required.

• Protect your financial information.

• Check your credit report every 12 months.

• Secure personal information in your home.

• Protect your personal computers by using firewalls, anti-spam/virus software, update security patches, and change passwords for Internet accounts.

• Don’t give personal information over the phone, through the mail or on the Internet unless you have initiated the contact or you are sure you know who you are dealing with.

For the rest of the IRS’ Dirty Dozen, click here.