As consumers have become more savvy about identity theft, criminals have come up with increasingly ingenious ways to hijack tax returns for nefarious purposes.
Here's a look at this year's most popular scams, and how to avoid them:
Fake e-mails from tax preparation software providers:
Consumers have been inundated with bogus e-mails claiming to contain important news from their tax software providers. TurboTax has seen a marked increase in reports of fraudulent e-mails, according to spokeswoman Julie Miller.
These so-called "phishing" e-mails are designed to steal financial information or infect recipients' computers with harmful viruses.
The increase in these e-mails illustrates how easily crooks adapt to changing times. In the past, crooks often used fake e-mails from the IRS to lure taxpayers into sharing personal information. The IRS responded by repeatedly reminding taxpayers that it never sends e-mails to individuals seeking personal information about their tax returns or refunds.
Tax software providers, on the other hand, routinely send e-mails to customers about the status of their refunds. As a result, even tech-savvy consumers may open an e-mail disguised to resemble an alert from TurboTax or H&R Block.
"If you've never used TurboTax, you can safely ignore" such e-mails, says Christine Frietchen editor of ConsumerSearch.com. "It's more confusing when you do have some kind of a relationship with the company."
There are, however, lots of warning signs. An attachment is a big tip-off that the e-mail is phony. Legitimate tax software companies will never ask you to open an attachment, even if you've started your tax return, Frietchen says.
A generic or overly familiar salutation is another sign that the e-mail is fake, Frietchen says. (She recalls receiving an e-mail purportedly from the IRS that addressed her as "Hello, dear.") Another warning sign: e-mails that contain grammatical errors or awkward language that sounds like "translated instructions for flat-pack furniture," Frietchen says.
Still not sure? Instead of opening the e-mail, go to the tax software company's website and log in, Frietchen says. If the company sent you a legitimate alert, you should be able to find it there. You can also look for examples of fraudulent e-mails in the website's anti-fraud section.
Fraudulent tax returns:
Armed with stolen Social Security numbers, identity thieves have filed thousands of fraudulent tax returns and collected billions of dollars in tax refunds.
Victims usually don't know a tax return was filed in their name until their actual tax return is rejected by the IRS, says Lu-Ann Dominguez, a tax attorney with Gunster, a law firm based in Fort Lauderdale. Some taxpayers have had to wait up to a year for their refunds while the IRS investigated, she says.
To avoid having your identity stolen, guard your Social Security number, Dominguez says. Don't give it to your doctor, dentist or other business. Finishing your taxes early is another way to protect yourself: Once you've filed, a crook can't file in your name.
If you decide to hire a tax preparer, make sure the company is legitimate, Dominguez says. Some crooked preparers - or businesses that do tax preparation on the side - have worked with identity thieves to cook up fraudulent returns. Earlier this year, two Detroit tax preparers were charged with using stolen identities and Social Security numbers of recently deceased individuals to generate more than $800,000 in fraudulent refunds.
Promoters of a new scheme targeted at senior citizens claim they can obtain refunds by filing for a "stimulus payment" based on the American Opportunity Tax Credit. Perpetrators have told victims that they can get a refund even if they don't normally file a tax return and haven't attended college in decades.
The IRS has stopped thousands of returns that falsely claim this credit.
Another variation of this scheme claims the credit is available to compensate individuals for taxes paid on groceries. Promoters often charge "exorbitant fees" to file for these credits and are typically long gone once the taxpayers realize they've been swindled, the IRS says.
By Sandra Block