Protect Yourself Against Income Tax Fraud

Protect Yourself Against Income Tax Fraud

For Canadian income tax payers

Canadian income taxpayers should be vigilant when they receive, either by telephone, mail, text message or email, a fraudulent communication that claims to be from the Canada Revenue Agency (CRA) requesting personal information such as a social insurance number, credit card number, bank account number, or passport number.

These scams may insist that this personal information is needed so that the taxpayer can receive a refund or a benefit payment. Cases of fraudulent communication could also involve threatening or coercive language to scare individuals into paying fictitious debt to the CRA. Other communications urge taxpayers to visit a fake CRA website where the taxpayer is then asked to verify their identity by entering personal information. These are scams and taxpayers should never respond to these fraudulent communications or click on any of the links provided.

To identify legitimate communications from the CRA, be aware of these guidelines and know what to expect when the CRA contacts you.

By phone

The CRA may

1. verify your identity by asking for personal information such as your full name, date of birth, address and account, or social insurance number
2. ask for details about your account, in the case of a business enquiry
3. call you to begin an audit process

The CRA will never

1. ask for information about your passport, health card, or driver’s license
2. demand immediate payment by Interac e-transfer, bitcoin, prepaid credit cards or gift cards from retailers such as iTunes, Amazon, or others
3. use aggressive language or threaten you with arrest or sending the police
4. leave voicemails that are threatening or give personal or financial information

By email

The CRA may

1. notify you by email when a new message or a document, such as a notice of assessment or reassessment, is available for you to view in secure CRA portals such as My Account, My Business Account, or Represent a Client
2. email you a link to a CRA webpage, form, or publication that you ask for during a telephone call or a meeting with an agent (this is the only case where the CRA will send an email containing links)

The CRA will never

1. give or ask for personal or financial information by email and ask you to click on a link
2. email you a link asking you to fill in an online form with personal or financial details
3. send you an email with a link to your refund
4. demand immediate payment by Interac e-transfer, bitcoin, prepaid credit cards or gift cards from retailers such as iTunes, Amazon, or others
5. threaten you with arrest or a prison sentence

By mail

The CRA may

1. ask for financial information such as the name of your bank and its location
2. send you a notice of assessment or reassessment
3. ask you to pay an amount you owe through any of the CRA’s payment options 
   
   
4. take legal action to recover the money you owe, if you refuse to pay your debt
5. write to you to begin an audit process

The CRA will never

1. set up a meeting with you in a public place to take a payment
2. demand immediate payment by Interac e-transfer, bitcoin, prepaid credit cards or gift cards from retailers such as iTunes, Amazon, or others
3. threaten you with arrest or a prison sentence

By text messages/instant messaging

The CRA never uses text messages or instant messaging such as Facebook Messenger or WhatsApp to communicate with taxpayers under any circumstance. If a taxpayer receives text or instant messages claiming to be from the CRA, they are scams!

When in doubt, ask yourself

1. Why is the caller pressuring me to act immediately? Am I certain the caller is a CRA employee?
2. Did I file my tax return on time? Have I received a notice of assessment or reassessment saying I owe tax?
3. Have I received written communication from the CRA by email or mail about the subject of the call?
4. Does the CRA have my most recent contact information, such as my email and address?
5. Is the caller asking for information I would not give in my tax return or that is not related to the money I owe the CRA?
6. Did I recently send a request to change my business number information?
7. Do I have an instalment payment due soon?
8. Have I received a statement of account about a government program I owe money to, such as employment insurance or Canada Student Loans?

If you do have a debt with the CRA and can’t pay in full, take action right away. For more information, go to When you owe money – collections at the CRA.

How to protect yourself from identity theft

1. Never provide personal information through the Internet or by email. The CRA does not ask you to provide personal information by email.
2. Be suspicious if you are ever asked to pay taxes or fees to the CRA on lottery or sweepstakes winnings. You do not have to pay taxes or fees on these types of winnings. These requests are scams.
3. Keep your access codes, user ID, passwords, and PINs secret.
4. Keep your address current with all government departments and agencies.
5. Choose your tax preparer carefully! Make sure you choose someone you trust and check their references. Always review your return, agree with the content before filing, and follow up to make sure you receive your notice of assessment, since it contains important financial and personal information that belongs to you.
6. Before supporting any charity, use the CRA website to find out if the charity is registered and get more information on the way it does business.
7. Be careful before you click on links in any email you receive. Some criminals may be using a technique known as phishing to steal your personal information when you click on the link.
8. Caller ID is a useful function. However, the information displayed can be altered by criminals. Never use only the displayed information to confirm the identity of the caller whether it be an individual, a company or a government entity.
9. Protect your social insurance number. Don’t use it as a piece of ID and never reveal it to anyone unless you are certain the person asking for it is legally entitled to that information. If an organization asks for your social insurance number, ask if it is legally required to collect it, and if not, offer other forms of ID.
10. Pay attention to your billing cycle and ask about any missing account statements or suspicious transactions.
11. Shred unwanted documents or store them in a secure place. Make sure that documents with your name and SIN are secure.
12. Immediately report lost or stolen credit or debit cards.
13. Carry only the ID you need.
14. Do not write down any passwords or carry them with you.
15. Ask a trusted neighbour to pick up your mail when you are away or ask that a hold be placed on delivery.

Visit Canada Revenue Agency website for more information.

United States Tax Payers

Tax Identity Theft – Protecting Your Credit and Finances

For American  income tax payers

Tax-related identity theft is a growing problem in America, and the more security breaches, information hacks and digital business we do as a society, the more consumers who fall victim to it. In fact, in 2016 alone, thieves stole more than $21 billion in tax refunds as a result of this simple, yet clever, form of identity theft.

What is Tax-Related Identity Theft?

Tax identity theft occurs when someone files a tax return using your Social Security Number. In some cases, thieves do this in order to claim a fraudulent tax refund. In others, they may have used your SSN to obtain employment. When this occurs, their employer will report all income to the IRS using that SSN. When you don’t report that same income on your own return, the IRS will flag it as suspicious and require you to pay taxes on that additional income. It may even lead to a tax audit.

Victims of tax-related identity theft face serious financial ramifications. Not only are they unable to file their own returns (or claim their tax refund), but it also may indicate other financial vulnerabilities are at work. Unauthorized loans, credit cards and other accounts may have been opened using the victim’s identity. Victims are typically encouraged to freeze their credit when tax-related identity theft occurs. They may also need to work with creditors and credit reporting agencies to clear their name of any fraudulent activity.

How Does Tax Identity Theft Happen?

Generally, tax-related identity theft — and all identity theft, for that matter — occurs after a person’s sensitive information has become public or fallen into the wrong hands. This often happens due to security breaches or digital data hacks, like the recent ones involving mortgage data, Quora users and Marriott/Starwood Hotels customers.

Tax-related identity theft often occurs in February and early March, as thieves must file the fraudulent returns before the real taxpayers file their legitimate ones. Fortunately, the IRS is taking steps to reduce identity theft from many angles. The agency has hired more employees dedicated to stopping fraud, implemented additional safeguards and also changed many of the standards used to file and authorize returns. Despite these efforts, tax-related identity fraud does still occur — and it’s important everyday Americans are ready should it happen.

How to Know You’ve Been Victimized

If you’ve fallen victim to tax-related identity theft, there are several ways you might learn of it. First, your legitimate tax return may be rejected. When you go to e-file your tax return, the IRS will reject it if a return has already been filed for your Social Security Number. If you filed a paper return, you would get a rejection notice in the mail, alerting you that your return has already been filed.

In the event the thief used your SSN to obtain a job, you likely won’t learn of the issue until your returns have been filed and processed. Once the IRS sees that your reported income does not match the income reported by employers to your Social Security Number, they will send you a later saying you failed to report income or that you owe additional taxes.

It’s important to note that all communications from the IRS will come via mail. The agency will not call, text or email you regarding your returns or any suspicious activity. Do not provide sensitive information to anyone pretending to be an IRS agent via these methods and report the issue to the U.S. Treasury Inspector General for Tax Administration.

What to Do Next 

If you discover that you are the victim of tax identity theft, you’ll need to report it to both the IRS and the Federal Trade Commission.

Specifically, you’ll need to:

1. Use Form 14039 to alert the IRS of the issue. Fill out the form, along with a copy of your Social Security card and driver’s license, to Internal Revenue Service, P.O. Box 9039, Andover, MA, 01810-0939. Make sure to send the letter by certified mail to ensure it arrives safely and untampered with. If you received a notice in the mail, include this with your letter as well.
2. Apply for an Identity Protection PIN. These are six-digit numbers that the IRS will use to confirm your identity on all future returns and filings.
3. Notify the Federal Trade Commission. File an identity theft report at IdentityTheft.gov in order to alert the FTC. This website can also help you create a plan of action for responding to identity theft.
4. Contact your state tax agency. There may be additional steps your state requires when identity theft occurs.

If you tried to e-file and got rejected, you should go ahead and file your paper return and pay any taxes you owe via mail. If at any point you need help in the process, call the IRS Identity Protection Specialized Unit at 800.908.4490 for assistance. An agent can walk you through the appropriate steps to both report and respond to the theft.

Visit The Simple Dollar website for more information.

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