Tax fraud schemes are expected to net scammers $5.7 billion in 2022, more than double the amount of last year, according to the Internal Revenue Service, and there doesn’t appear to be any slowing in sight.

While scams are on the rise, the good news is that the main tactics used by fraudsters remain basically the same, meaning that by understanding the signs of tax fraud and taking measures to combat it, consumers and businesses can make the most of tax season. You can avoid becoming a victim during this. ,

“Threat actors routinely take advantage of tax season,” said Selena Larson, a senior threat intelligence analyst with Proofpoint, an enterprise security company in Sunnyvale, California.

“They know that a large portion of the population will be dealing with the stress and urgency of having to file their taxes correctly and on time,” he told TechNewsWorld. “It is these pressures that make people more vulnerable to tax-themed email offering support or warnings, when it is actually a vessel for fraud.”

“And as tax season is directly related to finances, there is an open window for a big pay day,” she said.

Larson said threat actors are becoming more adept at employing social engineering to prey on people’s fears, emotions and urgency during tax season.

“They will take advantage of the IRS brand and spoof government sites, claiming to be a taxing authority, either to communicate some legitimate piece of required information – such as a change to a form or process – or to attempt to collect payment. ,” she explained.

Data breach fuels growth

Larson also advised consumers and businesses to be aware of fake “tax preparation services.” These types of attacks typically go beyond simple authentication credentials, such as usernames and passwords, he noted, and attempt to steal personal information, including Social Security numbers and bank account information.

“Most tax professionals provide excellent advice and can help people navigate complex tax issues,” IRS Commissioner Danny Werfel said in a statement. “But we continue to see instances where taxpayers are given bad advice by unscrupulous tax preparers who quickly disappear.”

The sheer volume of personal information circulating on the Internet from multiple data breaches has also contributed to the growth of tax fraud.

“There is a lot of information on the Internet that can be used in fraud schemes,” observed Abigail Schoeman, senior team lead with New York City-based Flashpoint, a provider of threat intelligence, threat analysis and incident response services. Which recently released a report on tax fraud.

“A lot of threat actors can collect that information and use it very easily in tax fraud schemes,” she told TechNewsWorld.

“Every year, more sensitive information about people is lost through data breaches and other means,” said Erich Krone, a security awareness advocate at KnowBe4, a security awareness training provider in Clearwater, Fla.

“This allows attackers to have a huge list of people to target, many of whom they have very detailed information about,” he told TechNewsWorld. “This helps these bad actors create more convincing social engineering emails and other communications.”

Threat actors will also recycle information, said Showman’s colleague, Tactical Threat Monitoring Analyst Rebecca McHale. “They can apply for unemployment benefits, then turn around and use that personal identification information for other schemes, including tax fraud,” she told TechNewsWorld.

“They want to earn the most bang for the buck from the compromised PII they hijack and steal for malicious purposes,” she said.

Scams galore

In its report on tax fraud, Flashpoint identified several ways fraudsters try to extort information or money from their targets, including:

  • Phishing. A tried-and-true technique that uses email to trick a target into visiting a malicious website or sharing information on their W-2 form.
  • Refund scams. A fraudster will contact the victim and offer to get them a higher-than-expected refund. When the target gives the scammer all the information needed to file a tax return, the scammer will file the return and send the refund to himself.
  • Filing for false tax credits. When a fraudster files a return for a victim, they will include claims for credits for which the target is ineligible.

“We’ve seen a lot of student tax credits get filed this way,” McHale said. “This would include the Lifetime Learning Credit and the American Opportunity Tax Credit.”

“Students are usually first-time filers and do not have major identity protections established such as an Identity Security PIN and adjusted gross income,” she explained.

Amy Nofziger, director of fraud victim support at AARP, noted that the organization’s Fraud Watch Network helpline continues to receive calls about IRS impostor scams.

“You’ll get a phone call or text saying there’s a problem with your tax refund, and you’re going to be arrested,” he told TechNewsWorld. “The scammers will then demand immediate payment, usually through pre-paid gift cards or other non-traditional forms of payment such as cryptocurrency.”

education is essential

Spear phishing is prevalent during tax season, observed Dror Liver, co-founder of Koro, a cloud-based cybersecurity company based in Tel Aviv, Israel. He told TechNewsWorld, “An attacker impersonates an employee or a vendor, sometimes, even the accounting firm used by the company, asking for data or tax documents that they or So do it for identity theft or do it for ransom.”

He recommended, “In addition to deploying anti-phishing protections, accounting departments should be retrained to identify and report phishing attempts.”

“Ahead of time the simulation will highlight which employees need additional training,” he said. Education can be an important weapon in the fight against tax fraud. “It helps potential victims identify these scams and stay safe,” John Clay, vice president of Threat Intelligence at Trend Micro, told TechNewsWorld.

“Educate your employees about how phishing works,” he advised. “Make sure they are aware of any communication suspicious that involves tax returns and financial transactions and have a process for employees to submit suspicious material to IT for review.”

He also recommended deploying an email message protection solution that uses machine learning and AI to detect spam and phishing emails.

However, fraudsters will not be the only ones who are using AI to further their goals.

“We’ve seen anecdotal talk about artificial intelligence being harnessed to fuel fraud, but it hasn’t been widespread this tax season,” McHale said. “While we haven’t seen it for this tax season, stay tuned. It’s something we’ll be keeping an eye on during next tax season.”