Wednesday, March 26, 2008

Beware crooks filing phony tax returns

NEW YORK (3/26/08)--One of the most serious problems facing taxpayers has nothing to do with calculations or complicated forms. An increasing number of complaints involves a form of identity theft, and it's throwing taxpayer victims for a loop (ABC News March 17).

Although the Internal Revenue Service (IRS) and Federal Trade Commission (FTC) received 20,782 complaints about tax refund fraud in 2007, the IRS is sure those numbers significantly understate the size of the problem because it's difficult to track (The Wall Street Journal March 12).

This form of ID theft occurs when a scam artist files a phony tax return--in your name, with your Social Security number and other personal information--in an attempt to collect a fraudulent refund.

In one case reported by The Wall Street Journal (March 12), a woman was notified by her bank that she had been rejected for a refund anticipation loan--yet she hadn't applied for one and hadn't even filed her tax returns yet. Another woman was asked by H&R Block Inc. to bring in some paperwork that she'd accidentally taken with her from its office two days earlier. After informing the agent that she hadn't been to the office and hadn't filed her taxes, she discovered that a crook had filed a tax return in her name and already pocketed a $4,005 instant loan.

In other cases, phony returns have been filed using children's Social Security numbers.

Take precautions to guard against tax refund ID theft:
  • Check out tax preparers. Make sure you hand over sensitive information only to people you trust after checking credentials carefully.
  • Choose passwords carefully. Don't use your birthday--it's on your tax form and easily can be lifted by crooks--or the word "password." Make sure all forms you print are password-protected.
  • Download forms with caution. If you download tax forms from the IRS website or tax documents from your employer, create a strong password--a combination of numbers, symbols, and upper and lower case letters.
  • Use caution with photocopiers. Some copiers store images of copies in memory. If so, personal information that's been copied may be compromised.
  • Ensure e-mails are encrypted. If you send tax documents to your accountant, make sure the information you send is scrambled--or encrypted--to prevent others from gaining access to sensitive information.
  • Use a secure mailbox. Mail your tax return from a secure location like a post office or a U.S. Postal Service collection box.
  • Beware fake calls. Phony calls or e-mails have one goal: to get you to hand over personal information or financial data. Remember that the IRS will never call you or send unsolicited e-mail asking for personal information.
  • Check your child's credit report. Go to and type "Letter Form 120" in the search box. Scroll down to Letter Form 120 Requesting a Child's Credit Report. If the child has no credit report, breathe a sigh of relief, because that means a crook hasn't set up fraudulent accounts in the child's name.

Report suspicious activity to the IRS at (click Taxpayer Advocate at the bottom of the page) and to the FTC at

courtesy of

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