Filbrandt Reports

Latest Scam: Tax Preparers’ Computer Records Breached

Volume 18, Issue 4

Executive Summary:

In this report, you will learn about a new tax fraud scheme:

  • Some tax practitioners’ computer records have been breached
  • After filing false returns, scammers then have a refund sent to the victim’s actual bank account
  • Thieves are using various techniques to reclaim the refund from the taxpayer

The Internal Revenue Service has warned taxpayers of a quickly growing scam involving erroneous tax refunds being deposited into their bank accounts.

Following up on a Security Summit alert issued Feb. 2, 2018, the IRS issued this additional warning about the new scheme after discovering more tax practitioners’ computer files have been breached. In addition, the number of potential taxpayer victims jumped from a few hundred to several thousand in just days. The IRS Criminal Investigation division continues its investigation into the scope and breadth of this scheme.

A New Twist On an Old Scam

These criminals have a new twist on an old scam. After stealing client data from tax professionals and filing fraudulent tax returns, these criminals use the taxpayers' real bank accounts for the deposit.

Thieves are then using various tactics to reclaim the refund from the taxpayers, and their versions of the scam may continue to evolve.

Latest Scam: Tax Preparers’ Computer Records Breached

Different Versions of the Scam

In one version of the scam, criminals posing as debt collection agency officials acting on behalf of the IRS contacted the taxpayers to say a refund was deposited in error, and they asked the taxpayers to forward the money to their collection agency.

In another version, the taxpayer who received the erroneous refund gets an automated call with a recorded voice saying he is from the IRS and threatens the taxpayer with criminal fraud charges, an arrest warrant and a “blacklisting” of their Social Security Number. The recorded voice gives the taxpayer a case number and a telephone number to call to return the refund.

The IRS repeated its call for tax professionals to step up security of sensitive client tax and financial files files.

The IRS urged taxpayers to follow established procedures for returning an erroneous refund to the agency. The IRS also encouraged taxpayers to discuss the issue with their financial institutions because there may be a need to close bank accounts. Taxpayers receiving erroneous refunds also should contact their tax preparers immediately.

Because this is a peak season for filing tax returns, taxpayers who file electronically may find that their tax return will reject because a return bearing their Social Security number is already on file. If that’s the case, taxpayers should follow the steps outlined in the Taxpayer Guide to Identity Theft. Taxpayers unable to file electronically should mail a paper tax return along with Form 14039, Identity Theft Affidavit, stating they were victims of a tax preparer data breach.

Filbrandt & Company recommends filing your taxes as early as possible, to narrow the window of opportunity an identity thief has to file a false tax return in your name and receive a fraudulent refund. (See our related blog post.)

Among the problems this can cause an identity theft victim is that he or she may be required to file paper returns in the future instead of filing tax returns electronically.

One way to combat this is to learn if you are eligible for an IP PIN number, a six-digit number assigned to eligible taxpayers that helps prevent the misuse of their Social Security number on fraudulent federal income tax returns.

The IRS says it continues to aggressively pursue the criminals who file fraudulent returns using someone else’s Social Security number.

Volume 18 Issue 4

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