IRS Warns that Corporate Payroll Departments Continues to Steal Tax Refunds

(CBS NEWS) The IRS sent out an ominous message late last month telling company human resource and payroll departments to watch out. The agency received reports that a scam, first detected last year, has been revived and potentially could expose innumerable employees to tax identity theft. It’s a multibillion-dollar fraud that strips real taxpayers of their legitimate government refunds.

In a related note, the National Cyber Security Alliance and the Identity Theft Resource Center are urging taxpayers to take extra precautions to protect their personal data -- and file early -- to beat identity thieves to the punch. The IRS accepts only accept one tax return per Social Security number, so filing early gives thieves less time to make you a victim. 

But if you attempt to file electronically and find your return rejected, beware. That’s often the first sign that someone is attempting to steal your refund.

“With the tremendous amount of personal and financial information available online, tax season is paradise for cybercriminals,” said Michael Kaiser, executive director of the National Cyber Security Alliance. “Unfortunately, even the most low-tech tax scam can cause lasting and expensive damage.”

Much like so-called phishing scams aimed at individuals, the latest tax ID theft scam uses publicly available data to trick victims into providing privy information. In this case, crooks attempt to lure corporate payroll departments into sending W-2 information -- including all  employees’ names, salaries and Social Security numbers -- to cybercrooks, who use that data to file false tax returns en masse, stealing refunds from the real taxpayers.

The crooks frequently pose as the company’s chief executive, sending an email to the HR or payroll department requesting data on all of the company’s employees.

Common wording in the bogus emails, according to the IRS:

• Kindly send me the individual 2016 W-2 (PDF) and earnings summary of all our company staff for a quick review.
• Can you send me the updated list of employees with full details (Name, Social Security Number, Date of Birth, Home Address, Salary)?
• I want you to send me the list of W-2 copy of employees wage and tax statement for 2016. I need them in PDF file type. You can send it as an attachment. Kindly prepare the lists and email them to me asap.

Once rare, tax ID theft emerged as a significant issue in the 2015 tax year, when some 1.2 million fraudulent returns -- claiming refunds of more than $7.2 billion -- were spotted prior to processing. That year more than a half-million taxpayers filed affidavits claiming that their identities and refunds had been stolen.

Since then, tax authorities have made a concerted effort to work with banks and corporations to stop ID thieves before they purloin refunds. Still, the attempts persist. During the first nine months of 2016, the IRS flagged roughly 787,000 fake returns, claiming $4 billion in refunds, and 237,750 taxpayers filed affidavits saying they, too, were victims of tax identity theft. More current data isn’t yet available.

Unfortunately, if you’re victimized, establishing that you are the real taxpayer due a refund and getting what you’re due can be an ordeal. The IRS will require you to report the fraud and fill out a form establishing how you learned of the crime and what tax years are affected. The agency also suggests that you file a fraud report with the Federal Trade Commission and report it to all three credit bureaus. 

Because the crime can be so pernicious and difficult to solve, the IRS has also established a special toll-free help line at 1-800-908-4490 where you can check the status of your claim. 

Though the agency has made significant progress from early days, when victims claimed they were treated like crooks and denied access to their refunds for years, it still often takes months to get your refund. Victims complain that the issue can continue to haunt them by drastically slowing their refunds for years.

Don’t let this happen to you.