The unfortunate reality is that scammers prey on uncertainty and fear. Handling your taxes each year can be stressful, and there are a lot of unknown variables. For many scammers, this makes it a perfect opportunity to exploit people. Most of them will pose as representatives of the Canada Revenue Agency (CRA) and attempt to trick you into paying fake debts through threats and intimidation or to extract your sensitive information to commit identity fraud or to sell to other criminals.

In a broad sense, income tax scams fall into two separate buckets – the first involves targeting taxpayers to steal their money directly. The second group of scams consists in stealing money from the government through fraudulent means, such as using a taxpayer or business as a proxy in a carousel scheme.

For individual taxpayers, some of the most common scams to look out for are;

Fake audits

The scammer contacts the target claiming to represent the CRA. They will attempt to claim discrepancies in your tax filings, and immediate payment is required.

Commonly, they will often make threats of additional fees, jail time, or other serious consequences. These tactics are designed to trigger fear and convince the victim to make an impulse decision to send the money.

Fake refunds/rebates

Sometimes fraudsters will prey on people expecting tax refunds. Instead, victims will receive an email, text message, or automated phone call posing as the CRA, usually directing them to a link provided that leads the victim to a phishing website. The phishing site will try to replicate official pages where personal details will be requested to extract your personal information.

Mistaken refunds

Moving up in the complexity of scams, there is a more sophisticated scam that deals in erroneous refunds. It’s much longer and more targeted than the other types of scams. It involves some of the same tactics but targets individuals and their information.

Identity thieves start by trying to hack or extract information from local tax preparation agencies, or they will purchase already stolen information. Then scammers will use the extracted customer information to file phony tax refund requests. The CRA processes the return and deposits money into the agency clients’ accounts.

They will then attempt something similar to the fake audit scam – posing as a CRA agent and demanding the money be paid back immediately using intimidation and fear tactics.

Fraudulent or dishonest tax return preparer

While most tax preparers are honest, some bad actors will leverage your situation to defraud the government. Always be cautious of tax preparers that don’t ask for standard information such as receipts or other typical documents or that ask you to pre-sign a blank tax return.

Another group of scammers will pretend to be official tax preparers during the busy season. If they are not properly qualified, there is a higher chance of problems or fraudulent returns. The fraudsters may also attempt to steal your personal information to use in their schemes or to sell to other scammers.

If you think you’ve been the victim of a scam or are in a troubling situation and don’t know what to do, then reach out to us, the tax law experts, for a consultation.

NOT LEGAL ADVICE. Information made available on this website in any form is for information purposes only and is a general discussion of certain legal matters. It is not, and should not be taken as legal advice. You should not rely on or take or fail to take any action based on this information. If you require legal advice, we would be pleased to discuss resolutions to specific legal concerns you may have.