Requesting a tax refund from the IRS on behalf of somebody else has been a widespread criminal activity for a number of years. Although the IRS is aware of the problem and tries to put some mechanisms in place that would prevent it from happening, it remains a huge issue.
We don’t think much about things like this until it happens to us. People usually believe that if they did not do anything wrong, they cannot be in trouble. However, even if it was someone else who filed a fraudulent tax return on your behalf, the IRS will still assume that you are responsible for the debt and falsified information, and it will be up to you to prove otherwise. This will cost you time and maybe even money.
What can you do to protect yourself? First of all, be aware of the methods that criminals use to receive your information.
One of the most common tax scam tricks involves “phishing” for your personal information, such as your full name, address, Social Security Number, etc. You might receive a phone call or email from a so-called IRS agent who is presumably processing your tax return, and needs to know where to deposit your refund, or to discuss an issue with your filed return. It is important to know that the IRS does not communicate with taxpayers in this way. If there is a problem with your return or anything else, you will receive an official IRS notice via mail. Some other tax scammers might pretend that they are employees of your bank and ask to provide your private information as a part of identification process before they can discuss your account with you.
If someone attempted to get your information over the phone or via email, you should never answer any of those questions, and immediately contact the IRS or a financial institution that presumably tried contacting you. If this was a scam, the IRS and your bank will have a specialized office that will be able to investigate the problem.
Another way to get in trouble is to hire a tax preparer whose intentions are not good. There is a huge number of stories about dishonest preparers that used their clients information to file fraudulent tax returns on their behalf and collected tax refunds.
When choosing your tax preparer, consider a Certified Public Accountant, Enrolled Agent, or a Tax Attorney. It might be more expensive that hiring just a regular preparer, but it might save you money in the long term. If you still cannot afford it, make sure that you have all necessary information about the tax preparer you are about to hire.
This includes BBB rating, recommendations from previous clients, etc. You should not use someone who promises you a large refund without even looking at your documents, or calculates his/her fees based on the amount of your anticipated refund. With regards to the fees, you should discuss them before hiring your tax preparer to avoid surprises. You can also ask if your preparer chose to complete the IRS voluntarily program of continuing education, which includes the most recent updates in tax filing and tax law.