Taxpayers should be aware of a new twist on an old scam involving erroneous tax refunds that are being deposited into their bank accounts. After stealing client data and filing fraudulent tax returns, these criminals use the taxpayers’ real bank accounts to deposit refunds, then use various tactics to reclaim the refund from the taxpayers. Here’s what you need to know.
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.
WHAT TO DO IF YOUR TAX RETURN IS REJECTED
Because this is a peak season for filing tax returns, taxpayers who file electronically may find that their tax return is rejected because a return bearing their Social Security number is already on file. If that’s the case, taxpayers should follow the steps outlined below. If you need additional information, please read the IRS publication, Taxpayer Guide to Identity Theft and contact the office if you have any questions.
If you are a victim of identity theft, the Federal Trade Commission recommends taking these steps:
- File a complaint with the FTC at identitytheft.gov.
- Contact one of the three major credit bureaus to place a ‘fraud alert’ on your credit records:
- Equifax, www.Equifax.com, 800-525-6285
- Experian, www.Experian.com, 888-397-3742
- TransUnion, www.TransUnion.com, 800-680-7289
- Contact your financial institutions, and close any financial or credit accounts opened without your permission or tampered with by identity thieves.
If your SSN is compromised and you know or suspect you are a victim of tax-related identity theft, the IRS recommends these additional steps:
- Respond immediately to any IRS notice; call the number provided.
- Complete IRS Form 14039, Identity Theft Affidavit, if your e-filed return is rejected because of a duplicate filing under your SSN or you are instructed to do so. Use a fillable form at IRS.gov, print, then attach the form to your return and mail according to instructions.
If you previously contacted the IRS and did not have a resolution, don’t hesitate to contact the office. You may also call the IRS at 1-800-908-4490 if you need specialized assistance.
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.
HOW TO RETURN AN ERRONEOUS REFUND TO THE IRS
Taxpayers who receive the refunds should call the office immediately, as well as review the steps outlined in Tax Topic Number 161, Returning an Erroneous Refund, which includes IRS mailing addresses should there be a need to return paper checks.
Note: By law, interest may accrue on erroneous refunds.
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. 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. Please contact the office for assistance if you aren’t sure what the correct IRS location is.
- 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).”
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 to the IRS.
If you receive a refund in error, you will need to follow established procedures for returning it to the agency as soon as possible. You should also notify your financial institution because there may be a need to close bank accounts. If you need assistance with this or any other tax matter, don’t hesitate to call.