The worst IRS scam ever! - Smith Conley & Associates, PC

Scam Alert! This newest ploy is one of the most effective cons we’ve ever seen. See below to find out what you should do if the crooks try to make you their latest victim.

In the past, we’ve written about some of the most popular ways that scammers try to take your money by pretending to work for the IRS (see IRS-Based Scams and Beware of these alleged IRS E-Mails).

In a recent issue of Forbes, details are given about the newest, and perhaps the most insidious, tax scam to date.

Just when you thought you’d heard it all – the IRS is warning about a new (and very effective) scam involving erroneous tax refunds being deposited into the actual bank accounts of clients. Then, the crooks use various tactics to con you into turning over the money to them.

Here’s how it works. Scammers steal client data from social media and other locations such as your birth date and social security number. That data is then used to file a fraudulent return which causes money to be placed in your bank account. Then these con artists, posing as IRS or other law enforcement, call attention to the error and ask you to return the money to them.

As far as you can tell, it looks like IRS just made an honest mistake and wants you to correct it.

To get the funds from real taxpayers, thieves use various tactics. In one version, criminals posing as debt collection agency officials acting on behalf of the IRS reach out to taxpayers to say a refund was deposited in error, and ask the taxpayers to forward the money to their collection agency.

This is especially effective because their claim of a tax refund (although a fraudulent one) being deposited into your account is true.

Sometimes you may receive a call with a recorded voice claiming to be from IRS; the caller threatens taxpayers 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.

If this happens to you – contact us first!

IRS has published procedures on the proper way to return the money to them.

If the erroneous refund was a direct deposit:

1. Contact the Automated Clearing House (ACH) department of the bank/financial institution where the direct deposit was received and have them return the refund to the IRS.
2. Call the IRS toll-free at 1.800.829.1040 (individual) or 1.800.829.4933 (business) to explain why the direct deposit is being returned.

If the erroneous refund was a paper check and hasn’t been cashed:

1. Write “Void” in the endorsement section on the back of the check.
2. Submit the check immediately to the appropriate IRS location. The location is based on the city (possibly abbreviated) on the bottom text line in front of the words TAX REFUND on your refund check.
3. Include a note stating, “Return of erroneous refund check because (and give a brief explanation of the reason for returning the refund check).”

If the erroneous refund was a paper check and you have cashed it:

1. Submit a personal check, money order, etc., immediately to the appropriate IRS location.
2. If you no longer have access to a copy of the check, call the IRS toll-free at 1.800.829.1040 (individual) or 1.800.829.4933 (business) (see telephone and local assistance for hours of operation) and explain to the IRS representative that you need information to repay a cashed refund check.
3. Write on the check/money order: Payment of Erroneous Refund, the tax period for which the refund was issued, and your taxpayer identification number (social security number, employer identification number, or individual taxpayer identification number).
4. Include a brief explanation of the reason for returning the refund.
5. Act quickly: Repaying an erroneous refund in this manner may result in interest owed to the IRS (remember, it’s not your money, to begin with).

If this happens to you, it means that someone has access to your bank account information. Don’t forget to work with your bank and, if needed, open a new set of accounts.

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David Conley

David is a partner at Smith, Conley & Associates, PC. In addition to writing and tax consulting, he is active in the pro-life community serving as President of the Fayette County Right to Life chapter of Georgia Right to Life.
He is also a founding Board Member and Finance Director of the Fayette Pregnancy Resource Center and serves on the Board of the National Equal Rights Institute.