Welcome to Financial Advisor IQ
Follow

Taxpayers Hit With 400% Jump in Phishing and Malware

February 24, 2016

Advisors should warn their clients they are likely to deal with a much bigger threat from fraudsters, who already increase their activity during the tax return season, Yahoo Finance writes.

High net worth clients, meanwhile, will have to deal with pressure from the other side as well, as the Internal Revenue Service boosts its scrutiny of anyone making over $1 million, according to the Wall Street Journal.

Phishing and malware scams are up 400% this tax season, according to the IRS, Yahoo Finance writes.

The IRS is trying to fight back — after all, it paid out $5.2 billion in fraudulent returns in 2013, although to its credit it prevented a further $24.2 billion from going to scammers, according to Government Accountability Office data.

Identity theft is the biggest priority for the IRS but the agency also warns against phone scams and phishing, as well as fraudulent tax return preparers and anyone promising inflated refunds.

The agency is also focusing on offshore tax avoidance, fake charities, as well as falsely padded deductions and excessive business credit claims.

Other scams in the agency’s crosshairs are incomes falsified to claim credits, abusive tax shelters via complex products, and frivolous tax arguments brought to court, which the agency says are constantly thrown out and carry a potential penalty of $5,000.

To avoid being a victim, advisors can warn their clients against opening links in emails from unknown addresses and responding to requests for their personal information, according to Yahoo Finance.

In addition, some fraud can be averted by changing passwords on email accounts annually, and filing early and electronically rather than through the mail, but never over public wifi, according to the website.

Meanwhile, people earning more than $1 million a year have another frustration to contend with: audits.

(Getty)

The IRS has audited almost 10% of tax returns of more than $1 million, compared to 7.5% in 2014 and to less than 1% of the 147 million total returns submitted in 2015, according to the Wall Street Journal.

And while the rate of audits for people earning more than $200,000 has held steady since 2006 at around 2.6%, the rate for high earners stood at 5.3% in 2006, according to the Journal.

One CPA tells the Journal that while his high-income clients can expect more frequent calls from the IRS, the audits are less comprehensive than they were 10 years ago.

In addition, the agency is now more likely to conduct audits via correspondence rather than face-to-face — but the likelihood of getting a human IRS rep on the other end of the phone line has also dropped, the CPA tells the publication.

By Alex Padalka
  • To read the Yahoo Finance article cited in this story, click here.
  • To read the Wall Street Journal article cited in this story, click here.