“‘Tis the season” – it’s a phrase often heard in November and December, reminding us all that a special time of year is upon us. It’s not a phrase you hear all that often in the months leading up to the 15th of April – the first deadline for filing your personal taxes. However, accountants and fraudsters may be joyfully singing “’tis the season” in those months – because tax refund fraud makes this the season for people and companies to keep their guard up and pay attention.

Believe it or not, tax return fraud is big business, adding up to hundreds of millions and even billions of dollars annually – of your money. In 2013 the IRS paid out approximately $5.8 billion in fraudulent refunds that they determined were bogus filings.[1] By March 2016 alone, the IRS had identified 42,148 tax returns with $227 million in fraudulent 2015 returns.[2]


Help Your Borrowers Avoid Tax Fraud


Our current tax-refund system equates to a “pay first, ask questions later” system, said Victor Searcy, director of fraud operations at IDT911, an identity protection and risk services firm in Scottsdale, Ariz.[3] To file a tax return electronically, you only need a name, date of birth and social security number. A creative fraudster would then falsify W2 information to submit for reimbursement. The IRS accepts tax filings as soon as January 1 and employers are not required to submit employment data until March. By then the IRS would have already paid out refunds.

The IRS is investing significant time and money to reduce tax refund fraud – but realistically, it won’t be eliminated anytime soon. But informed tax payers can help reduce their own risk of becoming victims of fraud.

That’s where you come in. As a loan officer, you’re in a unique position to reinforce with your customers the importance of protecting their personal information. In addition to stressing the steps your company takes to protect customer information, during tax season you can provide timely guidance on how your customers can avoid becoming victims of tax refund fraud. In doing so, you can raise your profile to that of trusted advisor and increase the likelihood of customer referrals. The best part? You don’t have to be a cybersecurity expert to offer expert advice.

The IRS offers a comprehensive fact sheet full of helpful tips on how to protect yourself from tax refund fraud and what to do if you suspect a fraudulent refund has been filed.

For starters, the IRS stresses that they will never contact a filer via phone, email, fax or social media to request personal or financial data or demand immediate payment. If you’re unsure whether a mailed notice is genuinely from the IRS, call the agency to find out.

One of the best pieces of advice you can offer customers is to encourage them to file their tax returns as soon as they possibly can. This has two benefits. First, they’ll get their money back sooner (and can maybe use their refund on something special for their new house). Second, that fraudster will move on to the next victim, abandoning any attempt to convince the IRS that they are the legitimate refund applicant.[4]

Warning Signs of Tax Fraud

The IRS fact sheet also provides warning signs of possible tax-related identity theft that you can pass along. Those include the IRS or a tax professional mentioning the following:

  • More than one tax return was filed using your SSN
  • You owe additional tax, refund offset or have had collection actions taken against you for a year you did not file a tax return
  • IRS records indicate you received wages or other income from an employer for whom you did not work

Victim of Tax Fraud?

The fact sheet also includes steps to take if you think you may be the victim of tax fraud, including:

  • Contacting the IRS Identity Protection Specialized Unit at 800-908-4490
  • Filling out the IRS Identity Theft Affidavit, Form 14039
  • Reporting the fraud to additional agencies such as the Federal Trade Commission, the major credit bureaus and your local police
  • And considering putting a freeze on your credit report at all three major credit bureaus

In today’s competitive market, customer experience can make all the difference. By taking time to provide relevant extras like this, you can distinguish yourself from the competition, strengthen your relationships with your customers and gain more business.

Take a deeper look at tax fraud with our mortgage infographic:
Tax Fraud Facts

Tax Fraud Infographic

Some Additional Tax Fraud Resources

Check out these additional references for more information to pass on to your customers:

IRS site for current news and alerts on scams

Suspicious e-Mails and Identity Theft

Improvements in 2017 to help reduce tax fraud

Tax fraud and identity theft information

Initial site at IRS

Secondary IRS site

FTC ID Theft site – what to do next

Information from the National Tax Security Week

IRS New Safeguard for 2017


[1] krebsonsecurity.com

[2] Forbes.com

[3] CNBC.com

[4] Fortune.com

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