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Money January 2016

Dollar Sense

What You Should Know to Protect Your Money and Your Identity in Tax Season, Plus Why Do We Say ‘Pay Through the Nose?’

By Teresa Ambord

To protect taxpayers, the IRS reminds us how to spot a fake. Here are five things tax scammers  and fake IRS agents do, which the actual IRS will not do:

IRS Trying Harder to Help Victims of Tax Identity Theft

Tax time is rolling up again. That also means that thieves are salivating over the open season when they can file fraudulent tax returns and collect hefty refunds, possibly using your Social Security number (SSN). This isn’t new, but it is a growing problem that reaches to all corners of the country.

Many victims — including my sister — complain that the IRS does little or nothing to help them find out what happened. When someone filed a tax return in my sister’s name and absconded with a large, fraudulent refund, the IRS scolded her. She filed early in the season and expected a quick refund. Instead she was told she’d already filed and gotten a refund.

She hadn’t, and the IRS wasn’t much help. It took until December for my sister to get her refund. Now, each year the IRS sends her a PIN which she must use to file her return safely. Like so many other victims, what she learned was that the IRS would only help if the taxpayer persistently complained. Under fire for their lack of assistance, things seem to be changing.

Help from the IRS has been slow coming, but here’s one step forward: if you are a victim of tax identity theft, you can get copies of fraudulent returns filed in your name and SSN (if you are the primary or secondary taxpayer on the return, but not to dependents, and not for business returns). https://www.irs.gov/Individuals/Instructions-for-Requesting-Copy-of-Fraudulent-Returns.

In a letter, you’ll need to supply:

  • Your name and SSN
  • Your mailing address
  • Tax year(s) of the fraudulent return(s) you are requesting
  • The following statement, with your signature beneath: “I declare that I am the taxpayer.”

You’ll also need to send a copy of a government-issued ID, such as a driver’s license or passport.

Don’t get in a rush, waiting for a response, because the IRS will try to resolve the underlying fraud before providing you with a copy of the fraudulent return. An acknowledgment of your request could take 30 days, and a copy of the return, up to 90 days. At this time, you can only request a copy of a fraudulent tax return filed using Forms 1040, 1040A, 1040EZ, 1040NR, or 1040NR-EZ. Also, the address you list in your request must match the address of record you have on file with the IRS. If you’ve recently moved, the IRS advises you to file a Form 8822, Change of Address before requesting a copy of a fraudulent return.

 

Another Tax Scam to Watch for: Fake IRS Agents

You may live in a remote, safe corner of the United States. But thieves that operate on the phone know no geographic boundaries. IRS Commissioner John Koskinen recently told reporters, “These telephone scams are being seen in every part of the country, and we urge people not to be deceived by these threatening phone calls. We have formal processes in place for people with tax issues. The IRS respects taxpayer rights, and these angry, shake-down calls are not how we do business.”

Tax season is when they heat up, but the truth is, they operate all year long. Taxpayers can be more susceptible during and right after tax season, because they have recently filed returns and aren’t all that surprised to hear from the tax agency. Tax scammers are convincing. They have some details about you, gleaned from various sources, and they may have a fake caller ID that makes it appear the call is coming from the IRS. They have well developed stories, with fake names and fake IRS badge numbers that sound real. They promote a sense of urgency, making you believe you are in trouble and may be arrested or have your driver’s license or business license revoked.

To protect taxpayers, the IRS reminds us how to spot a fake. Here are five things tax scammers and fake IRS agents do, which the actual IRS will not do:

  1. They will not call and demand immediate payment, nor will they call to talk about taxes owed without first contacting you by mail. They also will not contact you by e-mail to tell you of a problem.
  2. They will not demand payment of taxes without giving you the chance to question the tax bill, or appeal the amount.
  3. Require you to make a payment using a specific form of payment, such as a prepaid debit card.
  4. Ask for credit or debit card numbers over the phone.
  5. Threaten to have you arrested for non-payment.

As the public becomes more aware of tax identity scams, thieves up their game in an effort to convince the people they target. They provide you with some information about yourself or family members. They may also provide you with a genuine IRS address and instruct you to mail something to that address (something meaningless to the IRS, like a copy of the receipt for the prepaid debit card). The point of course is to convince even diligent, savvy taxpayers that the call is real.

So what should you do if you get a call from someone who claims to be from the IRS, asking you to pay?

  • If you think you may indeed owe taxes, the IRS says, do not give out any information. Hang up immediately, and contact the IRS yourself by phone, at 1-800-829-1040 and ask for assistance.
  • If you have no reason to believe you may owe taxes, contact the Treasury Inspector General for Tax Administration at 1-800-366-4484 or at www.tigta.gov to report the incident.
  • You can also report this online at the Federal Trade Commission. Go to ftc.gov, and click on “file a consumer complaint.”

 

On a Lighter Note: Why do We Say That?

Speaking of taxes… did you ever wonder where we got the saying “pay through the nose?” Some sources believe this saying came from the idea of being “bled for money” through a painful experience like a bloodied nose. According to one source, the History Channel reports that the Vikings in the 9th century taxed the Irish heavily. The tax was meant to keep the Vikings from raiding Irish towns. If the Irish couldn’t pay, the Vikings would slit their noses as a punishment and a warning for the future.

 

Teresa Ambord is a former accountant and Enrolled Agent with the IRS. Now she writes full time from her home, mostly for business, and about family when the inspiration strikes.

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