Add tax return scams to the ever-growing list of ways crooks are ripping off people, warns Michelle Corey, president of the St. Louis Better Business Bureau.
In recent years, identity thieves have been filing bogus tax returns and collecting refunds, said Corey who advises consumers to regularly check their financial and credit reports for signs of wrongdoing.
Tax scams are just one of the schemes that the BBB is warning St. Louisans about. Some are seasonal, like disreputable home repair companies that sweep through the Midwest after damaging storms. Others are updated versions of oldies, like bogus lotteries and sweepstakes that target senior citizens. (Read about computer virus and other scams here.)
Why do people keep falling for such schemes?
“It's difficult to make judgment on someone for what they might do until you walk in their shoes,’’ Corey said. “These scams are so sophisticated and convincing that they can happen to the most educated people who typically would not make those types of decisions. It’s almost a brainwashing process that they go through.’’
Doug Shadel, a fraud expert with the AARP, warns that online scams are continuing to grow as a percentage of overall fraud crime. According to a new AARP study, scam victims tend to be more open and engaged when they’re online than non-victims: They open emails from unknown sources, click on pop-up ads or sign up for free offers.
“But the finding we think that is new and the most interesting is that victims reported 53 percent more negative life events than non-victims,’’ Shadel said. “And what is a negative life event? Things like losing your job or death of a spouse or having had a serious illness. Feelings of loneliness showed up quite heavily. People worried about the amount of personal debt they had. Life stressors. ‘’
Shadel likened falling victim to a scam to getting a cold.
“Cold germs are all around us. Two people go into a room and one person catches a cold while the other person doesn’t. What’s the difference between those two? Well, one person probably has a stronger immune system. The other a weaker immune system. The same with scams. Scams are all over the internet, and they’re all over the marketplace. Most of the time we resist unless your immune system has been weakened by some kind of life event.’’
Shadel said those findings might change the way AARP warns consumers about scams.
“It’s not enough to just say, 'Be careful about the things you click on online.' You also have to pay attention to where you are in your life. What things have happened in the last year that might weaken your defense system,’’ he said.
According to Corey, here are five scams that St. Louisans should know about:
1. Tax Return Identity Theft
Corey said the IRS and Department of Justice have investigated various forms of tax scams. In some cases, people who file tax returns receive notifications from the IRS that returns have already been filed in their names — and that refunds have already been issued to them.
“It’s usually brought to your attention by the Internal Revenue Service. As soon as they see a duplicate tax form they’ll notify you,’’ Corey said.
At that point, consumers should contact the IRS for guidance and also take action to prevent further damage. The number for the IRS Identity Protection Specialized Unit is 800-908-4490.
“You need to check your credit report periodically to make sure someone’s not out there trying to pretend they are you, taking out fake loans in your name, or in this case, filing tax returns under your name,’’ Corey said. “The faster you’re aware of it, the faster you can stop it.’’
She warns that identity theft is the fastest growing, most serious fraud in the United States.
“It is being done in many, many methods. For instance, at a major retail store you could swipe your card and become a victim. You can go online and give out information to a company that you thought was reputable, but maybe it was a bogus company using a reputable company name,’’ Corey said.
Consumers should guard their personal financial information.
“Don’t carry around your Social Security number. If you get bank statements, credit card statements, checking account statements, keep them in a secure place. If you don’t need them anymore, shred them. When you’re entering your PIN number in a public place keep it covered. You don’t know who’s standing behind you,’’ she said.
The IRS has published a list of 2014 tax scams on its website, including a warning about a new phone scam demanding payment for unpaid taxes. Victims of this scam are threatened with arrest, deportation or suspension of a business or driver's license if they don't wire money immediately.
2. Sweetheart Scams / Online Dating
The growing popularity of online dating services has attracted scammers who hide behind fake profiles and photographs, Corey said. After developing online relationships with their targets, they ask for money so they can visit — or they claim to have a financial hardship.
“We’ve seen instances where they’ll say, ‘There’s been a major health issue. Can you help me out?’ And, unfortunately, when people do help them — someone they have never actually met — they find out that it was a scam and they were duped. It’s very unfortunate, very sad. It doesn’t happen often, but it is happening out there, so people need to have their guard up,’’ Corey said.
3. Jamaican / Nigerian Sweepstakes Or Lottery Scams
Corey describes lottery schemes as “old scams with new stripes” that frequently target senior citizens.
“They may receive a letter in the mail saying they’ve won a sweepstakes or lottery. It’s a convincing letter. They have to send something in or call a number, and then that’s when the scam begins,’’ Corey said.
The scammers convince their victims that in order to collect their prizes -- millions of dollars – they will need to pay taxes or processing fees. The scammers provide directions for payment: Wire the money or purchase a prepaid money card and mail it to a provided address.
“Once they do it, they will be contacted over and over again for more money,’’ Corey said.
Corey said that if the victims realize they’ve been duped and refuse to send more money, the scammers might use intimidation and threats.
“They become very frightened so they continue,’’ Corey said. “We have seen one person in Ladue who lost $1.2 million. We saw someone in metro east who lost $60,000. And it was only discovered because someone was checking on them. A neighbor, a friend, a family member realized they’d been getting a lot of junk mail for sweepstakes and lotteries or a lot of phone calls during their visits. They realize that this person has been brainwashed into believing they have won some thing when, in fact, they have not.’’
Corey warns consumers that there is a lot of information available about them online. Scammers can also access that data.
4. Storm damage repairs
When a tornado or severe storm hits the Midwest, storm chasers appear in damaged areas selling emergency home repair services, Corey said.
“They’ll go door to door and convince individuals that they are a local company when, in fact, they’re not. That they are a reputable company when, in fact, they’re not,’’ she said.
Some scammers will provide a bogus contract and collect a large down payment.
“Sometimes they’ll even request all the money up front,’’ she said. “Then they’ll leave and you’ll never see them again. In some cases, they may start some of the work, but they don’t come back to finish it.’’
Corey said it is important to check out a company’s reputation before signing a contract or making a down payment.
“Ask for references. Make sure that company is a local company that will be here tomorrow that you can locate and that you can trust,’’ she said.
She encourages consumers to check the BBB’s website, which rates local businesses and charitable organizations.
5. Advance-Fee Loan Scams
Loan schemes target some of the most vulnerable members of the community, Corey said.
There are two contributing issues: People who are struggling financially might drop their guard. If they can’t get a traditional loan from a credit union or a bank they might turn to an online loan website.
“Once you fill out that application form, a couple of things could occur,’’ Corey said. “You will disclose financial personal information because you have to do that to get this personal loan. And they will steal your identity. Or, they will call and tell you that you’ve been approved for a loan, but they need for you to provide some payment either for processing fees or application fees.’’
The scammers often ask that the fees be wired to them or put on a prepaid money card.
“You may not see that loan, and you may say goodbye to the money you paid up front,’’ she said. “It is very sad. And we see these cases over and over again. And it’s usually the ones who can least afford to be scammed.’’
About the BBB: The St. Louis BBB is one of more than 100 in North America. It is a nonprofit trade association that accredits businesses in 92 counties in eastern Missouri and southern Illinois.
AARP Fraud Network: Consumers can sign up for free online alerts about frauds at the AARP website.
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