Self-Protect for businesses and consumers against Tax Fraud Season
According to the Internal Revenue Service, in 2022 the tax fraud schemes of about $5.7 billion spiked double compared to last year.
While, scams may be on the rise, the turning point is that the core tactics used by fraudsters still remain unchanged. Further, by understanding the signs of tax fraud and taking necessary measures to counter it, consumers and businesses can avoid becoming victims during tax season.
“Threat actors regularly capitalize on tax season,” observed Selena Larson, a senior threat intelligence analyst with Proof point, an enterprise security company in Sunnyvale, California.
“They know a large segment of the population will be dealing with the stress and urgency of filing their taxes correctly and on time,” she told a news report. “It is these pressures which make people more susceptible to a tax-themed email offering support or a warning when it’s actually a vessel for fraud.”
“And as tax season directly deals with finances, there is an open window for a bigger payday,” she said.
Larson added that threat actors are getting more adept at employing social engineering to prey on people’s fears, emotions, and urgency during tax season.
“They will leverage the IRS brand and spoof government sites, claiming to be a tax authority either communicating some legitimate piece of needed information — such as a change to a form or a process or attempting to collect a payment,” she explained.
Data Breach Fuelled Growth
Larson advised consumers and businesses to be aware of phony “tax preparation services.” These types of attacks usually go beyond simple authentication credentials, such as usernames and passwords.
Furthermore, they attempt to steal personal information, including social security numbers and bank account information.
“Most tax professionals offer 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 ‘ghosted’ by unethical tax preparers with bad advice who quickly disappear.”
Personal Information
The sheer amount of personal information circulating on the internet from numerous data breaches has also contributed to the growth of tax fraud.
“There’s a lot of information on the internet that can be used in tax fraud schemes,” observed Abigail Showman, senior team lead with Washington, D.C.-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 utilize it pretty easily in tax fraud schemes,” she added.
“Every year, more sensitive information about people is lost in data breaches and through other means,” explained Erich Kron, 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 a news firm. “This helps these bad actors make more convincing social engineering emails and other communications.”
Threat actors will recycle information, too, noted Showman’s colleague, Tactical Threat Monitoring Analyst Rebecca McHale. “They might apply for unemployment benefits, then turn around and use that personal identifying information for other schemes, including tax fraud,” she added.
“They want to get the most bangs for the buck from the compromised PII they hijack and steal for malicious purposes,” she said.
Scams Galore
In a recent tax report on taxt fraud, it is been observed that fraudsters try numerous ways to outsource information and money form their targerts.
These ways include the following:
Phishing: A tried-and-true technique that uses email to get a target to go to a malicious website or to share information on their W-2 form.
Refund scams: A fraudster will contact a victim and offer to get them a larger-than-expected refund. After the target gives the scammer all the information needed to file a tax return, the trickster will file the return and have the refund sent to himself.
Filing for false tax credits. When a fraudster files a return for a victim, they’ll include claims for credits for which the target is ineligible.
“Students are usually first-time filers and don’t have great identity protection set up yet, like their identity protection PIN and adjusted gross income,” McHale said.
Amy Nofziger, director of fraud victim support at the AARP, noted that the organization’s Fraud Watch Network Helpline continues to receive calls about IRS Imposter scams.
Education Is Imperative
Notably, Spear phishing is prevalent during tax season, observed Dror Liwer, co-founder of Coro, a cloud-based cyber security company based in Tel Aviv, Israel. “An attacker impersonates an employee or a vendor, sometimes, even the accounting firm the company is using, asking for data or tax documents which they then use either for identity theft or hold for ransom,” he added.
“Simulation ahead of time will highlight which employees need additional training,” he added. Education can be an important weapon in the battle against tax fraud. “It helps potential victims to recognize these scams and stay safe,” Jon Clay, vice president of threat intelligence at Trend Micro said.
“Educate your employees on how phishing works,” he advised. “Ensure they are suspicious of any communications that involve tax returns and financial transactions and have a process for employees to submit suspicious content to IT for review.”
He also recommended deploying an email messaging security solution that utilizes machine learning and AI to detect spam and phishing emails.
However, fraud fighters won’t be the only ones using AI to advance their aims.
As per reports, as observed fraudsters also exploit artificial intelligence to facilitate fraud. However, this tax season, it hasn’t been widespread. It’s something we’ll be keeping an eye on during the next tax season.”
