Not surprisingly, one of the best ways to guard against tax scams is to stay informed, which is why the Internal Revenue Service has made it a priority to alert the public of emerging threats. Below is a rundown of some of the latest scams, including those that landed on the IRS's most recent Dirty Dozen list of common scams.
Identity-theft refund fraud. The scam, which topped this year's Dirty Dozen list, typically works like this: Crooks use stolen information, including victims' names and Social Security numbers, to submit tax returns (at the state and/or federal levels) early in the filing season and claim fraudulent refunds.
"Crooks have found that this is easier, relatively speaking, than other criminal enterprises, such as running drugs," said Kay Bell, a tax analyst for Bankrate.com. "It's the organized crime of the 21st century."
The rise in refund fraud has coincided with the spike in hacks of companies and government agencies that hold sensitive consumer data. In the last couple years, upward of 120 million Social Security numbers, representing more than one-third of the U.S. population, were exposed in just four breaches, according to Adam Levin, chairman of consulting firm IDT911. The breaches included hacks of Anthem, Premera Blue Cross, Excellus BlueCross BlueShield and the U.S. Office of Personnel Management.
According to a Government Accountability Office report, there was an estimated $25.6 billion in attempted identity-theft refund fraud in 2014. The IRS managed to recover or prevent the payout of $22.5 billion of that. But it paid out $3.1 billion in refunds to thieves posing as tax filers, according to the report, which cites IRS data.
"Refund fraud has been taking place for some time, but two years ago it spiked, particularly at the state level," said David Williams, chief tax officer for tax-prep software company Intuit, which is taking part in a public-private partnership, formed in 2015, to combat the rampant problem.
The IRS has made some inroads through enhanced information-sharing with its Security Summit partners, which include state tax agencies and large tax-prep companies, and through other initiatives.