Stay Vigilant: A Guide to Avoiding Tax Scams and Identity Theft
Tax season is effectively the Super Bowl for the team here at Christiansen Accounting in California. While our seven-person team is busy ensuring your filings are accurate, criminals are equally active, ramping up sophisticated efforts to trick taxpayers into revealing sensitive information. These identity thieves aim to file fraudulent returns and intercept your hard-earned refunds, often leaving a trail of financial destruction in their wake.
It may seem like we emphasize identity theft protection frequently, but that is because having your identity compromised is a true financial nightmare. It is a process that can take years of administrative hurdles to resolve. Scammers are relentless and clever, constantly evolving their tactics to find a single point of entry. One small slip is all it takes for the nightmare to begin, which is why Corina Christiansen, as the lead on our Written Information Security Plan (WISP), prioritizes these safeguards for all our clients.
Recognizing the Imposters
The first step in defense is awareness. Scammers frequently mimic the IRS name, logo, and official-looking website designs to create a false sense of legitimacy. They may also use the names of other federal agencies, such as the U.S. Department of the Treasury, to pressure victims. In these identity theft schemes, the fraudster poses as a trusted official to lure you into revealing bank account numbers, passwords, or Social Security numbers. This data is then used to drain accounts, open new lines of credit, or claim fraudulent tax benefits in your name.
These scams typically arrive via letter, fax, email, phone call, or text message. When an email is used to bait victims, it is categorized as a “phishing” scam, a tactic that remains highly effective for criminals.
Protecting California’s Seniors from Financial Fraud
Scammers often target individuals over age 65 or those nearing retirement, knowing these individuals may have significant tax-deferred assets. Once a senior is coerced into providing funds, the scammers often return for more. Beyond the initial theft, there are severe tax consequences to consider. If funds are stolen from a tax-deferred retirement account, those lost amounts may be treated as a taxable distribution. This could trigger ordinary income tax and, for those under age 59½, potential early withdrawal penalties. While a theft loss deduction might be available if the scam was profit-motivated, the process of claiming it is notoriously complex.
We encourage you to talk with elderly family members about suspicious messages. Empowering them with knowledge about current scam tactics can prevent them from making quick decisions that jeopardize their financial well-being.
How to Identify a Modern Tax Scam
Phishing emails and “smishing” texts share specific hallmarks. They almost always create a manufactured sense of urgency, pressuring you to act before you can think clearly. They might claim you are in legal trouble, that your account is locked, or that an unexpected prize is waiting for you. Be extremely cautious of unsolicited requests for payment via phone, email, or text. If a deal seems too good to be true, it almost certainly is. Always verify communications through official channels or consult with our office before responding. Watch for these specific red flags in emails:
Requests for an unusual amount of personal data, such as a mother’s maiden name or specific credit card security codes.
“Bait” messages that mention a pending refund or offer payment for participating in an IRS survey.
Threats of immediate consequences, like blocking access to your bank accounts or adding penalties to your tax bill.
Incorrect agency names or unprofessional grammar (many scams originate from non-native English speakers overseas).
Suspicious links that do not lead to the official www.irs.gov site. You can hover your mouse over a link to see the actual URL before clicking.
Sender addresses that look almost correct but contain slight misspellings or use non-standard domains.
Common Digital Threats: Phishing and Smishing
Emails are often used to install malware or redirect you to clone websites. Common themes include phony tax refunds, threats of legal action for alleged fraud, or notices of “underreported income” that contain malicious attachments. Some emails will even ask you to “update your account” using a link like “IRSgov” that is missing the crucial dot before the extension.
Smishing texts are equally dangerous. You might receive a text claiming your account is on hold or alerting you to “unusual activity.” Others promise quick economic impact payments or provide a callback number that connects you directly to a scammer’s call center.
Actionable Steps to Secure Your Identity
Never click: Do not engage with links or attachments in unsolicited tax-related communications.
Know the IRS rules: The IRS will never demand immediate payment over the phone or insist on specific methods like gift cards or wire transfers. They also do not threaten arrest or deportation.
Verify directly: Use official numbers found on the IRS website or log into your secure IRS Online Account.
Report it: Forward suspicious emails to phishing@irs.gov. For texts, send the details to the same address with “Text” in the subject line.
Get an IP PIN: The Identity Protection PIN is a six-digit number that prevents someone else from filing a return with your SSN. It is valid for one year and provides a critical layer of authentication.
The IP PIN program is open to any taxpayer who can verify their identity. You can join voluntarily through the IRS Get an IP PIN tool.
The Danger of Social Media "Tax Hacks"
Misinformation is rampant on social media platforms. Influencers without formal tax training often promote “hacks” to maximize refunds by falsifying information. These claims are not only inaccurate but can lead to audits and heavy penalties. Many of these posts are actually gateways for scammers to gain your trust. For real tax advice tailored to your situation in California, always rely on professional guidance rather than a viral video.
Conclusion
The IRS typically initiates contact through the U.S. Postal Service, not via email, text, or social media. If you receive a communication that leaves you feeling uneasy, do not respond. At Christiansen Accounting, we are here to help you navigate these threats and keep your financial data secure. If you have questions about a notice you received or want to discuss identity protection strategies, please contact our office today.
Beyond individual concerns, business identity theft is a rising tide of financial crime that requires specific vigilance for California entrepreneurs. While individual theft focuses on Social Security numbers, business identity theft targets Employer Identification Numbers (EINs). Scammers use stolen EINs to file fraudulent tax returns that claim massive business credits or to open lines of credit and bank accounts in the company’s name. This can be devastating for a small business, as it can freeze your ability to access capital or result in the IRS questioning your legitimate business expenses. At Christiansen Accounting, we help our clients monitor for unusual transcripts or notices from the IRS that might indicate their business identity has been compromised. We often see these issues arise when business owners are not receiving their expected tax documents or when they receive a notice from a bank about an account they never opened.
The Dangers of the Ghost Preparer
Another significant threat during the busy tax season is the rise of the ghost preparer. A ghost preparer is someone who is paid to prepare your tax return but refuses to sign it or include a Preparer Tax Identification Number (PTIN). By law, anyone who is paid to prepare or assist in preparing federal tax returns must have a valid PTIN and sign the return. Ghost preparers often promise inflated refunds based on fake deductions or credits, but they leave the taxpayer holding all the risk. When the IRS audits the return, the ghost preparer has disappeared, and the taxpayer is responsible for all back taxes, interest, and penalties. To protect yourself, always ensure your tax professional is willing to sign the return and provides you with a copy of everything filed. In our office, every return is vetted and signed by qualified professionals who stand behind the work performed.
California-Specific Fraud: The Franchise Tax Board Alerts
Living and working in California adds another layer of complexity, as the Franchise Tax Board (FTB) has its own set of fraud-prevention protocols. Scammers often target Californians with notices that mimic official FTB correspondence regarding the Middle Class Tax Refund or other state-specific credits. These fraudulent notices might ask you to activate a debit card on a fake website or provide your bank account information to receive a direct deposit. It is important to remember that the FTB will not contact you by text or social media to request personal information. If you receive a letter that looks like it is from the state but seems suspicious, do not provide any information. Instead, bring the letter to our office so we can verify its authenticity through our professional channels with the state.
Child Identity Theft and Tax Filing
One of the most heart-wrenching forms of fraud involves the theft of a child’s Social Security number. Identity thieves target minors because their credit reports are usually clean and their Social Security numbers may not be used for tax filings for many years, allowing the crime to go undetected. A criminal might use a child's information to claim them as a dependent on a fraudulent return or to apply for government benefits. You might only discover this when you try to file your own return and the IRS rejects it because your child has already been claimed by another taxpayer. Protecting your family’s information is a core part of our mission, and we recommend that parents consider freezing their children's credit and being extremely cautious about sharing their Social Security numbers on school or sports forms.
The Anatomy of a Refund Transfer Scam
A more sophisticated scheme involves the criminal actually filing a return and having the refund deposited into the victim's real bank account. Once the money arrives, the scammer calls the victim, posing as an IRS agent or a collection agency, and claims the refund was sent in error. They then instruct the victim to return the money via a specific method, such as a wire transfer or by purchasing gift cards. In reality, the refund was legitimate in the sense that it came from the IRS, but it was based on a fraudulent return filed by the scammer using the victim's stolen data. If you receive an unexpected deposit from the IRS or the U.S. Treasury, do not spend it and do not transfer it to anyone who calls you. Contact your bank and our office immediately to begin the process of returning the funds through official government channels.
The Role of the WISP in Data Security
As mentioned earlier, Corina Christiansen leads our effort in maintaining a robust Written Information Security Plan (WISP). This is not just a document we keep on a shelf; it is a living set of protocols that governs how our 7-person team handles your sensitive data every day. From the way we encrypt our emails to the multi-factor authentication required to access our servers, every step is designed to prevent a data breach. We also undergo regular training to recognize new social engineering tactics that scammers use to try and get inside a firm’s software. By choosing a firm that prioritizes a WISP, you are ensuring that your tax data is handled with the highest level of professional care and security.
Formal Recovery: Navigating Form 14039
If the worst happens and you do become a victim of tax-related identity theft, the recovery process begins with IRS Form 14039, the Identity Theft Affidavit. This form is used to alert the IRS that your Social Security number has been compromised and that a fraudulent return may have been filed. Filing this form triggers an investigation by the IRS, which can be a lengthy process. During this time, your legitimate refund may be delayed as the agency works to verify your identity. We assist our clients through this administrative maze, helping to gather the necessary documentation and communicating with the IRS Identity Protection Specialized Unit to resolve the issue as quickly as possible. Having a professional advocate during this time can significantly reduce the stress of the situation.
Technology and the Human Element
While we use high-level encryption and secure portals for document exchange, we also recognize that the human element is often the weakest link in security. This is why we encourage our clients to use strong, unique passwords for every financial account and to never share sensitive documents via standard, unencrypted email. We provide all our clients with access to a secure digital vault where documents can be uploaded and stored safely. This not only streamlines the tax preparation process but also ensures that your 1099s, W-2s, and other sensitive forms are never sitting in an unprotected inbox where they could be intercepted by hackers. Small habits, such as shredding physical documents and being wary of public Wi-Fi when accessing financial accounts, can make a world of difference in your overall security posture.
Our commitment to your financial safety extends beyond just filing a return once a year. We view ourselves as your year-round partners in financial health and security. By staying informed about the latest tactics used by criminals and implementing the professional safeguards we have discussed, you can move through tax season with confidence. The landscape of tax fraud is constantly shifting, but with the right team and a proactive approach, you can protect your assets and your peace of mind. We are always here to provide clarity and support as you navigate these challenges.
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