Everybody loves an income tax refund. But when a check for a tax refund shows up in your mailbox unexpectedly, it could be a signal of something very wrong: a tax scam.
It started around the New Year, when the Internal Revenue Service got wind that a number of tax professionals had their computer systems breached by identity thieves and taxpayer information was stolen. The number of potential taxpayer victims swelled from a few hundred to several thousand in just days.
But the scam doesn’t stop there. After stealing the client files from tax pros, the scammers filed fraudulent returns with the data – and had the bogus refunds sent to the real taxpayers’ bank accounts. Then, the scammers attempted to fool the legitimate taxpayer into sending the “erroneous” refund to them.
The IRS says it has seen at least two different versions of this new scam:
“In one version of the scam, criminals posing as debt collection agency officials acting on behalf of the IRS contacted the taxpayers to say a refund was deposited in error, and they asked the taxpayers to forward the money to their collection agency.
“In another version, the taxpayer who received the erroneous refund gets an automated call with a recorded voice saying he is from the IRS and threatens the taxpayer with criminal fraud charges, an arrest warrant and a ‘blacklisting’ of their Social Security Number. The recorded voice gives the taxpayer a case number and a telephone number to call to return the refund.”
The IRS is urging taxpayers to follow established return procedures if they get an erroneous or unexpected refund. Recipients of such refunds should also discuss with their financial institution whether closing a bank account is warranted, and contact their tax preparer immediately.
The following instructions come directly from the IRS and cover exactly what to do if a taxpayer gets an unexpected or unwarranted refund in error.
If the Refund was a Direct Deposit
- Contact the Automated Clearing House (ACH) department of the bank/financial institution where the direct deposit was received and have them return the refund to the IRS.
- Call the IRS toll-free at 800-829-1040 (individual) or 800-829-4933 (business) to explain why the direct deposit is being returned.
If the Refund was a Paper Check and Has Not Been Cashed
- Write "Void" in the endorsement section on the back of the check.
- Submit the check immediately to the appropriate IRS location listed below. The location is based on the city (possibly abbreviated) on the bottom text line in front of the words TAX REFUND on your refund check.
- Don't staple, bend, or paper clip the check.
- Include a note stating, "Return of erroneous refund check because (and give a brief explanation of the reason for returning the refund check)."
If the Refund Was a Paper Check and Has Been Cashed
- Submit a personal check, money order, etc., immediately to the appropriate IRS location listed below.
- If you no longer have access to a copy of the check, call the IRS toll-free at 800-829-1040 (individual) or 800-829-4933 (business) (see telephone and local assistance for hours of operation) and explain to the IRS assistor that you need information to repay a cashed refund check.
- Write on the check/money order: Payment of Erroneous Refund, the tax period for which the refund was issued, and your taxpayer identification number (social security number, employer identification number, or individual taxpayer identification number).
- Include a brief explanation of the reason for returning the refund.
- NOTE: Repaying an erroneous refund in this manner may result in interest due the IRS.
Where to Send Erroneous Refund Checks
These cities appear on the check’s bottom text line in front of the words TAX REFUND:
- ANDOVER – Internal Revenue Service, 310 Lowell Street, Andover MA 01810
- ATLANTA – Internal Revenue Service, 4800 Buford Highway, Chamblee GA 30341
- AUSTIN – Internal Revenue Service, 3651 South Interregional Highway 35, Austin TX 78741
- BRKHAVN – Internal Revenue Service, 5000 Corporate Ct., Holtsville NY 11742
- CNCNATI – Internal Revenue Service, 201 West Rivercenter Blvd., Covington KY 41011
- FRESNO – Internal Revenue Service, 5045 East Butler Avenue, Fresno CA 93727
- KANS CY – Internal Revenue Service, 333 W. Pershing Road, Kansas City MO 64108-4302
- MEMPHIS – Internal Revenue Service, 5333 Getwell Road, Memphis TN 38118
- OGDEN – Internal Revenue Service, 1973 Rulon White Blvd., Ogden UT 84201
- PHILA – Internal Revenue Service, 2970 Market St., Philadelphia PA 19104
For more information, consult Tax Topic Number 161 – Returning an Erroneous Refund.
Tax professionals can click here to check out the IRS’ recommended steps to upgrade their security.