February 20, 2018

Beware of Tax Scams Involving Fraudulent Refunds

Less than a week after we posted our recent story on criminals using tax season to wreak havoc in the lives of taxpayers, the IRS issued a warning about a new kind of scam that has affected thousands of taxpayers early in this year’s tax season — they describe an especially tricky ploy that involves depositing funds into taxpayers’ actual bank accounts. Here is how it works: fraudulent returns are filed by scammers on behalf of taxpayers, tax refunds are then erroneously deposited into taxpayers’ bank accounts by the IRS, and then the scammers contact the taxpayer pretending to be IRS agents seeking return of funds to a particular account. Once the taxpayer initiates the return transaction, the scammer has the money he or she was looking for.

Remember: the IRS will not contact you by phone or email to discuss your account or to request payment, and they do not employ robo-dialing messages to reach out to taxpayers over the phone. If a tax notice does not arrive in your (snail) mailbox, it is probably not legitimate. If the notice contains threats to “blacklist” your Social Security number or requests payment to a debt collection agency, the notice is not legitimate.

The IRS provides instructions on what to do if you receive an erroneous refund:

“If the erroneous refund was a direct deposit:

  • Contact the Automated Clearing House (ACH) department of the bank/financial institution where the direct deposit was received and have them return the refund to the IRS.
  • Call the IRS toll-free at 800-829-1040 (individual) or 800-829-4933 (business) to explain why the direct deposit is being returned.

If the erroneous refund was a paper check and hasn’t been cashed:

  • Write ‘Void’ in the endorsement section on the back of the check.
  • Submit the check immediately to the appropriate IRS location listed below. The location is based on the city (possibly abbreviated) on the bottom text line in front of the words TAX REFUND on your refund check.
  • Don’t staple, bend, or paper clip the check.
  • Include a note stating, ‘Return of erroneous refund check because (and give a brief explanation of the reason for returning the refund check).’

If the erroneous refund was a paper check and you have cashed it:

  • Submit a personal check, money order, etc., immediately to the appropriate IRS location listed below.
  • If you no longer have access to a copy of the check, call the IRS toll-free at 800-829-1040 (individual) or 800-829-4933 (business) (see telephone and local assistance for hours of operation) and explain to the IRS assistor that you need information to repay a cashed refund check.
  • Write on the check/money order: Payment of Erroneous Refund, the tax period for which the refund was issued, and your taxpayer identification number (social security number, employer identification number, or individual taxpayer identification number).
  • Include a brief explanation of the reason for returning the refund.
  • Repaying an erroneous refund in this manner may result in interest due the IRS.”

For additional information, read the full IRS warning at https://www.irs.gov/newsroom/scam-alert-irs-urges-taxpayers-to-watch-out-for-erroneous-refunds-beware-of-fake-calls-to-return-money-to-a-collection-agency

The IRS Criminal Investigation Unit continues to monitor episodes of fraud as we head into tax season. We will keep our readers informed as the IRS issues further guidance.