Administrators’ Note: With the Income Tax deadline closing in and today being “Tax Tip Thursday” we asked Neal O’Farrell to return to his earlier posting concerning Tax Scams. Enjoy this revamped edition of “The Taxman Cometh (and Identity Thieves are not far behind)” complete with our own tips in staying safe before and after the April deadline.

Is it just me or does it feel like tax time was not that long ago? As the tax deadline looms just around the corner, one group of citizens is just giddy with excitement. No, not tax preparers. For identity thieves, tax time is one of the best and busiest times of the year as they prey on unsuspecting taxpayers caught in a whirlwind of returns, refunds and rebates.

So why is tax time so good for identity thieves? Three simple reasons:

• A lot of money will be on the move as millions of citizens send and receive billions of dollars in tax payments over a very condensed period. According to the IRS during last year’s filing season nearly 100 million taxpayers received refunds totaling $260 billion. That doesn’t include all the checks that went out to the IRS from taxpayers.
• Tax time involves a lot of documents, laws, and communications – the ideal time to trick a busy taxpayer. And of course many of these documents contain the taxpayer’s crown jewels – name, address, spouse, employer, Social Security Number, bank account number and much more.
• The letters IRS scare most people and scare tactics have always worked well for thieves (Your computer has been infected, your bank account has been suspended – any of these sound familiar?)

Tax time scams are nothing new, and the scams we’ve seen so far this year are a predictable rehash of previous years. But what you really need to watch out for are more clever variations that are more likely to catch you off guard.

Most of the scams you’ll probably encounter this year will come in an email or phone message, although you shouldn’t rule out the possibility of a snail mail scam.

Here’s a selection of the kinds of tricks the scammers will use, and most are likely to come as pretty convincing IRS communications that will prey on fear, urgency, or greed:

• Someone else has submitted a tax return using your Social Security number and in order to fix the problem you’ll have to confirm your Social Security number (or submit an online dispute or claim form that includes your SSN).
• The IRS can expedite your refund if you submit your bank account and routing information.
• If you don’t accept direct deposit of your refund directly into your bank account, you’ll face a fee or penalty.
• The IRS has your stimulus check or rebate and would like to lodge it in your account. This can be a very effective trick because there are so many stimulus programs or discussions going on.
• The IRS would like you to participate in a taxpayer satisfaction survey which will eventually either ask you for personal information, or the link in the email will lead to a malicious download.
• The IRS now offers a generous installment payment plan if you owe taxes, and you can begin by submitting your bank account information.
• You’re being audited and you must respond within 24 hours using an online form.
• The IRS already sent you a check but it has not been cashed, and you’ll need to confirm your bank account information or Social Security number in order to have the check resent.

Banking Trojans are a major threat this year, and definitely not the kind of malicious software you want on your computer. These very sophisticated programs are designed to steal your bank login and password, clean out your bank accounts, and sneak away before you know it.

And if you have a banking Trojan on your computer when you file your taxes online, there’s a good chance you’ll lose your Social Security number too.

According to security firm Panda, Trojans made up nearly two thirds of all new malicious software identified during the first quarter of 2010, and the majority of these were banking Trojans according to the company.

Consumers are not the only target. Businesses can expect to receive fake IRS emails containing attachments purporting to be changes in tax laws, a tax problem with a specific employee, or threat of an audit.

The attachment or link is likely to contain a Trojan or other malware that could easily empty the victim’s bank account, and the FBI estimates that more than 200 businesses lost more than $40 million through this scam in 2009.

These can be very effective scams because businesses expect to receive this kind of correspondence, although they shouldn’t expect them by email.

And don’t just watch for IRS scams. There are numerous scams in circulation focusing on property tax appraisals, so keep an eye out from scam emails and even letters purporting to be from your local county tax assessor.

So what should you do to avoid being scammed?

• The Golden Rule! Always ignore every email or phone call you receive either from the IRS or local tax assessors. They will never email or call you – they always write.
• If you do receive a letter about your taxes, especially one that demands payments you’re not expecting, contact the IRS directly through their web site at www.irs.gov and use any case numbers included in the correspondence you received. They’ll tell you pretty quickly if they sent it.
• If you receive any emails at work purporting to be new tax laws or threats of an audit, again go directly to the IRS web site and contact them from there. Don’t open any attachments or click on any links.
• If you plan to make tax payments by check, make the check out to the Internal Revenue Service and not the IRS, because anyone who steals the check could easily change the letters and deposit the check. A few years ago a scammer made more than $500,000 by setting up a company called LRS Inc, stole tax checks from mail boxes, and easily changed IRS to LRS and deposited the checks in her own account.
• Scan your computer thoroughly and regularly for malicious software, and make sure you run a complete and deep scan before you complete or submit your tax returns online.
• Check your credit reports after tax time. If your Social Security number was compromised during the chaos, this is likely the time you’ll see strange things appearing on your credit reports.

Related posts:

1. The Tax Man Cometh (and identity thieves are not far behind)
2. Why Identity Protection for Kids Matters
3. Identity Fraud Fact: Little Guy is Big Target
4. Reflections from a Black Hat Hackers’ Conference (Part Two)
5. Saving Facebook: Perspectives on New Privacy Policies