IRS warns about a new scam type involving erroneous tax refunds

IRS warns about new Tax Refund Scam techniques

New IRS scam type involves erroneous tax refunds

Tax Season 2018 begun at the end of January 2018. The Internal Revenue Service (IRS) issued an official warning[1] in the second of February reminding people that the period of tax refund is the most active time for scammers. Almost two weeks after the first warning regarding scams, IRS released another report[2] about a new tax refund scam technique, which involves erroneous tax refunds.

Each year cybercriminals exploit various scam techniques to swindle people’s money and, unfortunately, they manage to do so successfully for many years already. Although there are many scam strategies revealed, recently IRS detected a new tendency exploited by hackers. With the help of phishing attacks, scammers steal the data of tax refund clients from professional refunding firms and file fraudulent tax returns. Furthermore, criminals use the stolen tax payer’s bank account details to deposit erroneous tax refunds.[3]

The hackers target tax refunding firms and steal information that is needed for filing phony refund requests. Once fake documents reach the IRS,[4] following all conventional procedures IRS prepares and processes the return and deposits money into bank accounts of the hacked company. Right after that, criminals contact the potential victim's impersonating collection agency and asking to return the required sum of money.

In most of the cases, the scammers that pretend to be official IRS agents call the taxpayers soon after a fake tax refund is deposited into their bank accounts. They introduce themselves and inform the potential victim that the return was filed in error. Scammers seek to intimidate the potential victim with criminal charges and significant penalties in case he or she refuses to pay the money for collection agency officials.

It’s more difficult to identify hackers who use fraudulent refund scam technique

From the first glimpse, the decision to hack tax payer’s accounts from the tax collection firms and then deposit erroneous tax refunds is a prolonged scam procedure in comparison to regular scams that are initiated directly via email or phone. However, employing the real clients’ data (credits, income, dependents, etc.) makes it difficult to potential victims and specialists to identify the fraudulent tax returns. As pointed out by IRS,

Criminals find alternative ways to get the fraudulent refunds delivered to themselves rather than the real taxpayers.
Hundreds of thousands of clients might have been affected

The executive vice president of the fraud division at the Oklahoma Bankers Association Elaine Dood commented on the issue and reported[5] that many institutions located in the Oklahoma City had been hacked. Such conclusion has been done after a close analysis of the money deposit scam when thousands of people approved the reception of the large sums deposited into their bank accounts simultaneously.

Shortly after that, most of the potential victims received a phone call from pseudo collection agents who asked them to forward the money to their collection agencies. The others received an automated call supposedly generated by IRS. The latter call employs psychological pressure by threatening clients to blacklist their Social Security number or impose a substantial monetary penalty.

By the way, to arouse confidence, impostors even set an individual appointment with the debt collector. The issue with fraudulent refunds might not be revealed that quickly if all the victims that were refunded would have been applied for that.

Watch out for DebtCredit company

According to the researchers, crooks are sending erroneous deposits into people’s accounts from the U.S. Treasury and introduces themselves as DebtCredit employees. The company has even an official website debtcredit[dot]us, but this domain is not active anymore. Security experts found out that the exact name that the scammers use is jcdebt[dot]com and it’s closely related to Debt & Credit Consulting Services company, which has been closed in 2010. In addition to the official website, the taxpayer should also get the following information:

  • bank account information;
  • “transaction error correction letter” with IRS letterhead
  • recipient instructions on the account number
  • ACH routing
  • wire number

Close your account if you received a fraudulent transfer from the IRS

In case you received a fake deposit transfer from the IRS or erroneous refund, contact your bank immediately because your account may have to be suspended due to a high-risk of cyber attack. Those whose returns have been rejected should also contact tax prepares to prevent identity theft.

Although filing the tax refund electronically is the most convenient way, it’s a must to be extra cautious when doing so. As one of the most important precautionary measures against tax refund scams is to follow the recommendations submitted in the Taxpayer Guide to Identity Theft.[6]

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Jake Doevan
Jake Doevan - Computer technology expert

Jake Doevan is one of News Editors for He graduated from the Washington and Jefferson College , Communication and Journalism studies.

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