Tax scams are among the most stubborn cons out there – reappearing often, each time with a slightly different spin. The main theme is scammers posing as the Canada Revenue Agency (CRA), trying to trick you into either paying up or sharing personal information.
These scams most often start with a phone call and take two basic forms. In the first version, the CRA "agent" says you owe back taxes and pressures you into paying by prepaid debit card or wire transfer. If you don’t comply, the scammer threatens you with arrest and fines. In the other version, scammers claim they are issuing tax refunds and ask you for personal information so they can send your refund. This information can later be used for identity theft. Scammers also use this approach to target college students by claiming a "federal student tax" has not been paid.
These imposters often go to great lengths to appear legitimate. The scammer may give a fake badge number and name. Your Caller ID may look like the call is coming from Ottawa. Con artists sometimes follow up scam calls with an email, which uses the CRA logo, colours and official-sounding language. In many instances, these scams start with a serious and official sounding “robocall” recording.
How spot this scam:
Pressure to act quickly - Scammers typically try to push you into action before you have time to think. The CRA will give you the chance to ask questions or appeal what you owe. Also, their first contact with you will always be by mail, not phone or email.
Non-traditional payment methods – With this scam, wire transfer, prepaid debit card or other non-traditional methods – which are largely untraceable and non-reversible – are the only accept payments. The CRA will never demand immediate payment, require a specific form of payment, or ask for credit card or debt card numbers over the phone.
Tax Identity Theft
Another scam to look out for is tax identity theft. This occurs when a scammer uses your Social Insurance Number to file a tax return in your name and collect your refund. It can also be someone using your information to get a job. Consumers don’t usually realize they have been victims of tax identity theft until they get a written notice from the CRA saying that more than one tax return was filed, or they were paid by an employer they don't know.
The best way to avoid tax identity theft is to file your taxes as early as possible, before a scammer has the chance to use your information to file a fake return.
If you are a victim in Canada, contact your local police service. If you believe your Canadian Social Insurance Number has been stolen, contact Service Canada at 1-800-206-7218.
Some tax preparers offer Refund Advances, which are essentially short-term loans in the amount of your expected tax return, less the tax preparation cost. The upside of these loans is that you can get the money right away. However, you should consider whether receiving your refund a couple of weeks sooner is worth the cost of the tax preparation service. Also look out for large deductions from the refund amount to cover fees.For more consumer tips, visit bbb.org