WASHINGTON (2/18/10)--Credit unions should warn members that tax-filing season brings out tax-preparation frauds. The latest scheme involves tax refunds transmitted as a direct deposit or automated clearing house (ACH) credit. CUNA Mutual Group alerted its policyholder credit unions Monday of the ACH Tax Refund fraud scam and urged credit unions to inform employees that consumers are being drawn in to fraud schemes by individuals claiming to be tax preparers (The Daily Exchange
Feb. 17). In this type of fraud, the victims unwittingly provide the bogus tax preparers with personal information such as their name, Social Security number, bank account numbers, investment information and more so the preparers can complete the tax forms. The tax preparer inflates the information with fraudulent information to obtain a larger refund. Some victims have found their tax preparers have claimed children they don't have, day care expenses and so on. The tax refunds are transmitted as a direct deposit (ACH credit) to a newly created account or to an existing account with an impersonator added as a joint owner. These accounts are established by an impersonator or a recruiter. Once the tax refund is deposited into the account, the impersonator or recruiter withdraws the tax preparation fee. The remainder of the ACH credit goes to the refund recipient. CUNA Mutual told credit unions that the Internal Revenue Service (IRS) will attempt to reclaim the ACH credits involving fraudulent tax returns. Credit unions, as the receiving depository financial institutions, are not liable if funds have been removed from the member's account and no funds are available to return, said the insurer. Credit unions should not honor a return request from the IRS since IRS warrants the liability, the company said. To mitigate risks, credit unions should be alert to these situations:
* The addition of new joint owners on a member's account. Consider freezing the account if the credit union suspects this involves a fraud. * New account openings receiving an ACH credit into the account from IRS. * The scammer has already removed the funds. In this case, the credit union is not required to return the ACH credit to the IRS if the credit union was unaware of a misdirected payment.
CUNA Mutual suggested these actions:
* Contact the association the credit union works with for ACH questions. * If the credit union has encountered this fraud situation, it should contact the local IRS, even if the credit union has not taken a loss: and * File a Suspicious Activity Report (SAR).
Last year the IRS prosecuted more than 200 people as phony tax preparersn said Seattle-based (Public News Service
Feb. 17). The IRS is already busy checking up on new tax scams, ranging from filing false returns to convincing clients they don't need to pay income taxes, The agency warns consumers about tax fraud scams every year. Richard Panick, field media relations specialist with the IRS, warned consumers to be extra careful when a preparer bases the fee on a percentage of promised refund. Consumers should also avoid preparers who claim to know something special or that they can get more money than anyone else, Panick told the news service. Also plan to sit with the preparers as they fill out the tax forms. Never just sign a blank form and trust them to file it, he said.