On the Money

Tax Day is here, and so are the scammers trying to take advantage. Here's how to dodge them

Tax fraud tactics
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Tax fraud tactics

Be on alert!

As many Americans scramble to file taxes by this year's April 18 deadline, experts warn that fraudsters are also hard at work—trying to get their hands on tax refunds, or manipulate unsuspecting taxpayers into sending them money or handing over sensitive information.

"Criminals are irrepressible and persistent," said John Koskinen, the I.R.S. Commissioner, told CNBC's "On the Money" recently. "Even I've gotten calls threatening me that the I.R.S is after me," said Koskinen.

That means consumers need to stay vigilant, even after they file their returns.

"Last year 25 percent of all of the scams reported to our [Better Business Bureau] (BBB) Scam Tracker Tool related to tax scams, and these go on all year long," said Emma Fletcher, the BBB's director of scam and fraud initiatives.

Here are the latest scams to watch out for.

Tax scam calls

Phone calls where a fraudster pretends to be the I.R.S. or the police collecting a tax debt, are very common, but there is a new twist. The agency announced earlier this week that it will begin using collection agencies for a small group of tax payers with overdue debts.

Previously, consumers were warned to ignore calls from the I.R.S., since the agency would not call to collect a debt without prior notice. For the most part, that still holds: The I.R.S. will send letters in the mail about a debt first, and will also send a letter informing you if your account has been moved to collection agency.

However, some say the new collection agency policy opens the door to potential scams.

"We're concerned about the confusion it may create, particularly because people have been receiving these scam phone calls for so long pretending to be the I.R.S," The BBB's Fletcher told CNBC.

For its part, the I.R.S. insisted it was "taking steps throughout this effort to ensure that the private collection firms work responsibly and respect taxpayer right." The agency also urged taxpayers to be wary of scammers who may use the new program to trick people.

W-2s for sale

Meanwhile, a taxpayer's wage statement could be for sale on the dark web.

This tax season, the I.R.S. has issued warnings about cyber criminals impersonating C-level executives to steal W-2 forms. This type of scam is known as business e-mail compromise and has been around for a bit. Yet this tax season, fraudsters began targeting new institutions such as schools and hospitals. In 2016, such scams netted criminals $3.2 billion, according to IBM Security.

Data hackers do not stop there. "They've also added a permutation where they've added a message saying, 'And could you wire transfer certain funds to this particular account?'" Koskinen said.

Here is how the scam works: "Someone in an HR department or a finance department get what's look like an e-mail from the CEO saying, 'You know, I need all the W-2s for our employees. Just send them along to me.'" Koskinen said.

Another way cyber criminals get wage information is through phishing e-mails.

"Usually the type of scam that we see is some form of email saying you have a tax return waiting, please send us your W-2, and then collect the W-2 and re-sell it in the criminal underground," said Etay Maor, senior fraud prevention strategist with IBM Security.

Once the fraudsters have the form, they can file a false tax return or sell it on the dark web for another criminal to commit identity theft. On secret online market places, W-2s fetch 10 to 20 times the price of a stolen credit card, according to Maor.

Finding the fraudulent returns

The silver lining is that the I.R.S. has gotten better at catching fraudulent returns.

"The amount of fraudulent refunds being paid to criminals has dropped from an estimate several years ago of over $5 billion, now to less than $2 billion. But that's still a lot of money and it's still a major challenge for us," Koskinen said.

One of the ways the I.R.S. catches criminals is tracking the computer used to file returns. "We can tell if a computer's being used to file 30 returns, that's probably a false set of returns, that's by a criminal," said Koskinen.

No iTunes cards or wire transfers

So how can you avoid sending money or personal information to a scammer? When it comes to phone calls, think of your prior interaction with the I.R.S.

"It's highly unlikely that you would receive a call from a debt collector unless you had ongoing debt for an extended period of time and the IRS has contacted you numerous times," Fletcher said.

Also, watch for the method of payment being asked for. If the phone call is asking for an iTunes gift card or a wire transfer, it's not the I.R.S.

As for phishing scams, avoid clicking on links—even if an e-mail looks legitimate. Instead, go directly to the I.R.S. or your tax provider's website.

And even more importantly, the I.R.S. will never e-mail you. The agency prefers to start all communication via post mail.

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