Refunds and rip-offs: Are clients aware of scams?
This season it seems as if as many people are trying to steal money as claim refunds. The IRS has issued its robust Dirty Dozen list of tax scams, and schemes make headlines almost every week. But are clients aware of the dangers?
“We get calls all the time – and even though we talk about it with them, [clients] still think they’re legit,” said Helen O’Planick, an Enrolled Agent at HELJAN Associates in Manchester, Pa. “The scams are getting much better, and that’s what I am most fearful of.”
“People … do not seem to ask us about tax scams until something happens to them,” said CPA Gail Rosen of Wilkin & Guttenplan, a CPA firm in Martinsville, N.J. “We get calls from clients who receive a scam phone call or email and check in with us before responding.”
Old crime, new twists
The IRS reports that scam calls and phishing emails or websites remain among the most threatening scams this season. According to the IRS, the Treasury Inspector General for Tax Administration reports almost 13,000 victims who have collectively paid over $63 million as a result of phone scams since 2013. In a recent twist, ID thieves file fraudulent returns with refunds going into the real taxpayer’s bank account – followed by a phone call trying to con the taxpayer to send the money to the scammer.
“Most of the scams that my clients have been reporting to me are through messages left on their voicemail,” said Jeffrey Gentner, an EA at JR Gentner & Associates in Amherst, N.Y. “Often clients call me just to confirm what they already suspect. The IRS and the media have done a good job alerting taxpayers about all the various scams and my clients are more aware of them than ever before.
When they call me to inquire or confirm these scam calls, I tell them that they shouldn’t respond and that if they get any other called or mail inquiries they should contact me,” Gentner said. “I also mention these scams when we meet for their prep appointment.”
EA Laurie Ziegler at Sass Accounting, in Saukville, Wis., reported fewer inquiries than expected. “I’m advising all clients, especially those with security concerns, to allow me to enter their driver’s license information in my software as an extra added layer of protection.”
Preparer forethought seems energetic – and, with luck, effective. “I continually send out reminders to my clients … I forward warnings from the IRS, TIGTA, the FTC, state tax departments and so on,” said New York EA Phyllis Jo Kubey. “The main thing is to keep the cautionary messages alive for them.”
Taxpayers reporting themselves as ID theft victims declined 40 percent last year from 2016, according to the IRS, the second year in a row that this number fell. “Through blogging, social media, email and my newsletters I’ve been trying to keep clients updated on tax scams. We also discuss [them] at tax appointments,” said Burbank, Calif., CPA Brian Stoner, who said he’s seen “a dramatic decrease in client identity theft issues. For the 2015 filing season, I had 15 cases of false tax return filing out of more than 200 clients. For the 2016 filing season, that dropped to one case.”
The changing tactics of scammers mean preparers must continuously adapt. Kubey, for instance, has had legitimate prospective clients contact her with e-mails including attachments of documents. “I explain that I’d never open an attachment from an unknown sender and that tax professionals are targets of many scams ourselves,” she said. Indeed, cybercriminals post stolen EFINs, PTINs and CAF numbers on the Dark Web as a “crime kit” for ID thieves to use to file fraudulent returns, according to the IRS.
“I’ve even received phone calls threatening me that they’ll send the ‘cops,’ not local law enforcement, to get me if I don’t respond to their requests for information about false tax amounts due,” said Scott Kadrlik, a CPA and managing partner at Meuwissen, Flygare, Kadrlik & Associates in Eden Prairie, Minn.
It seems all preparers can do is keep hammering at clients. “All of my clients are on a mailing list and I send out emails on a routine basis telling them of the latest scams,” said Morris Armstrong, an EA and Registered Investment Advisor with Armstrong Financial Strategies in Cheshire, Conn.
“I did have one client tell me that she would never ever fall for one, and then a few weeks later she called semi-panic-stricken because she clicked on a link that she should have known better,” he added. “Fortunately, no harm done that I know of.”