Sunday, April 15, 2007

The IRS warns of a late-breaking Internet tax scam, just before the April 17 deadline. Are you at risk?

IRS warns of online tax scam
The IRS warns of a late-breaking Internet tax scam, just before the April 17 deadline. Are you at risk?
By Brian Braiker

April 14, 2007 - Haven’t done your taxes yet? If not, you’re in good company—with the deadline extended to April 17 this year, millions of honest taxpayers still have yet to file. In the rush to get them done on time, many may turn to the Web to file electronically.

And as a result, some may get fleeced.

The Internal Revenue Service announced Friday that they had discovered a new late-breaking scam: bogus Web sites are masquerading as affiliates of the IRS’s Free File Alliance of 19 tax-software companies. The people who set up these scam sites take tax information from well-meaning taxpayers, change their bank account numbers to their own and then file the return through a legitimate Free File partner.

Terry Lemons, a senior spokesperson for the IRS, stresses in an interview with NEWSWEEK’s Brian Braiker that such scams are nothing new—and the only way to safely participate in the Free File program is by going directly to the official IRS site. He also warns of other common scams that pre-date the Internet, and extolls the virtues of legitimate electronic filing. Excerpts:

NEWSWEEK: What caused you to alert taxpayers to this?
Terry Lemons: We have a program available through our Web site where people can prepare their tax returns for free through 19 different private-sector companies. What we discovered late Friday is that there was a site pretending to be one of the affiliates to get these people’s tax information, with official looking logos. If you stumbled onto this site you might think it’s legitimate. People were entering info, and the [people behind the scam site] were taking the bank account number, changing it to their own, and having the refund routed to their bank account.

How many of these scam sites are there?
We identified a couple of questionable sites [on Friday, April 13]. We’re still taking a look at them. It’s still very early in the process.

What are their URLs?
This is where it gets tricky. Because the investigation is still underway, I can’t point you to specific sites. But if you’re concerned, go to the official IRS site. That’s the only way to enter one of these Free File sites. There are legitimate places out there that offer online tax preparation for a fee. But if you want to actually do free filing through our Free File program, you have to go through the IRS—if you think you’ve entered it and you didn’t go through the IRS Web site, you’re not in the Free File program.

What recourse can the people who’ve been scammed take?
We are working to identify who the affected taxpayers are. We’re going to do everything possible to help these people out.

How many have been scammed so far?
It’s too early [to know] in this particular scam. It popped up so late in our tax season; we’re just days away. You have millions of people preparing, so you don’t want to have someone in a rush do an Internet search and end up at an unscrupulous site.

Is this similar to scams you’ve seen in the past?
At this time of year we typically see a lot of tax scams pop up. People have been thinking of countless ways through the years to scam taxpayers. We’ve seen a lot of phishing incidences, people using e-mail malevolently. Every March we see a spike in people sending out e-mails pretending to be from the IRS. With tax or any kind of financial information, any time you get an e-mail asking you to click on a link, rather than clicking, you really ought to be sure you’re going to the legitimate Web address.

What sort of scams predate the Internet?
One classic scam is people going door to door impersonating IRS agents; that’s been around for a long time. Another scam is people who pretend to be tax preparers and promise a big refund. Some of those guys will simply put their own bank account numbers on the return. Some unscrupulous preparers put some big refund on the return and ask for a percentage. That’s a real warning sign that you’ve got someone that’s not legitimate on your hands. And even if you go through a tax preparer, you’re the one ultimately responsible for what’s on the tax return. You need to treat the decision the same was as you would selecting a doctor or lawyer.

Any honest mistakes to watch out for?
The most common mistake we see is in people doing paper returns and making math errors. Simple mistakes like that and writing the Social Security number wrong. That’s the nice thing about filing electronically, that’s taken care of.

Have you filed your taxes yet?
[Laughs.] I’m still working on mine. I usually get mine done early but we’ve had a really busy tax season. This time of year everyone works for the IRS.