2 min read

Tax Refund Fraud

May 9, 2018 6:30:00 AM

Tax Fraud - Blog

The day you receive your tax return is often a day of celebration. While refund recipients are out celebrating, some are finding themselves a victim of tax refund fraud.

In the past, tax identity theft has been relatively easy. Criminals file a fraudulent tax return with a counterfeit W-2 form under the victim’s name and Social Security number (SSN), and then wait for a refund from the IRS. If the IRS fails to identify the fraudulent return, the victim receives a notification that their return has already been filed.

There’s now a new twist on this old scam. It involves tax refunds being deposited into real taxpayer bank accounts. Criminals are using phishing and other schemes to steal client data from tax professionals. Using that data, they file fraudulent tax returns and use the taxpayers' real bank accounts to deposit a tax refund. The criminals then pose as the IRS, or other law enforcement, call attention to the error, and ask taxpayers to return the money.

One way to get the funds from a taxpayer is to pose as a debt collection agency official acting on behalf of the IRS. They tell the taxpayer that the refund was deposited in error and ask the taxpayers to forward the money to their collection agency.

Another tactic used is an automated call with a recorded voice claiming to be from the IRS.  The caller threatens the taxpayer with criminal fraud charges, an arrest warrant, and a “blacklisting” of their Social Security number. The recorded voice then gives the taxpayer a case number and a telephone number to call to return the refund.

Unfortunately, it’s hard for the taxpayer to decipher from reality versus a scam because in reality the taxpayer typically does have a bogus tax refund in his or her bank account.

Criminals know it is more difficult to identify and halt fraudulent tax returns when they are using real client data such as income, dependents, credits, and deductions. Additionally, it's harder to track when criminals find alternative ways to get the fraudulent refunds delivered to themselves rather than the real taxpayers.


The best thing you can do to reduce the chance of becoming a tax fraud victim is file your tax return right away. This reduces the chance that criminals will file a fraudulent refund ahead of you in your name.

It’s also important to be on the lookout for warning signs for tax-related identity theft, which include:

  • A notification that your SSN was used to file more than one tax return
  • A notification about unreported wages.


If you are a victim of tax-related identity theft, it’s important to do the following:

  1. Submit an Identity Theft Affidavit using IRS.gov (Form 14039)
  2. Continue to file your tax return (use a paper form, if your electronic submission is rejected and attach the Identity Theft Affidavit)
  3. Respond promptly to IRS correspondence regarding the fraud
  4. Place a fraud alert with at least one of the three major credit bureaus (Experian, Trans Union, or Equifax)
  5. Consider freezing your credit with each of the three credit bureaus
  6. Use your credit monitoring and identity protection services to keep an eye out for fraudulent accounts and other signs of fraud.
Your identity is precious. Be vigilant about sharing your personal information. Before doing so, make sure you are aware how a company or person is going to protect it from being stolen or hacked.
Topics: Risk Management

Written by Gibson

Gibson is a team of risk management and employee benefits professionals with a passion for helping leaders look beyond what others see and get to the proactive side of insurance. As an employee-owned company, Gibson is driven by close relationships with their clients, employees, and the communities they serve. The first Gibson office opened in 1933 in Northern Indiana, and as the company’s reach grew, so did their team. Today, Gibson serves clients across the country from offices in Arizona, Illinois, Indiana, Michigan, and Utah.