April 15, 2007 -- Just before the deadline for personal income tax filings, the Internal Revenue Service is warning consumers of a scam that targets the majority of American taxpayers who file online.
The scheme is so new, the government has no idea how many taxpayers have been bilked. The scam takes advantage of the federal "Free File" program, in which the IRS partners with software makers to allow taxpayers who earn up to $52,000 in taxable income to file electronically for free.
It works like this: Internet grifters send e-mails, luring taxpayers to Web pages that look like IRS-approved sites where they can file their taxes electronically.
"It's very easy for someone to set up a scam site," said Internet analyst Omar Wasow, "the sort of thing a teenager could do with a little bit of Web experience."
The scam artists send in the tax returns after redirecting refunds to their own bank accounts instead of those of the taxpayers.
"We're very concerned about this, because there is a Web site out there that looks like it's affiliated with the IRS but it really isn't," IRS spokesman Terry Lemons said.
Internet tax filing simply has become too rich a target for scam artists to pass up, analysts say. More than half of the nation's 136 million filers have given up the paper and gone online, and nearly 7 in ten have filed online as of last week, the IRS says.
Lemons noted that taxpayers can avoid the scam by simply going directly to the www.irs.gov Web site, rather then following links sent to them via e-mail or using search engines to find taxpayer software sites.
Steven Peisner runs a non-profit identity theft support organization called sellitSAFE.com. He said a 24-year-old Northern California woman contacted him recently after someone else pocketed her $4,000 refund.
"She's pretty much in shock," he said. "And I think that being April 15 is today, I think we have just scratched the surface. And this is just the first victim that I've come in contact with right now. I think in the next couple of months we are going to see hundreds, if not thousands, of victims start to surface. And I think it's going to be a much bigger problem in the next few months."
Lemons said it is the latest of many scams targeting taxpayers.
"This is a new twist on an old scam for us. Every year as the tax deadline nears we see new types of tax scams coming up," he said. "This year its a little different. They're using the Internet to try luring taxpayers in."
Evangelos Soukas did it the old-fashioned way, netting thousands of dollars using stolen identities to collect other people's refunds. The new swindle goes one step further, duping taxpayers into volunteering their information.
"It doesn't take Einstein to file false tax claims. It's actually pretty easy," he said during a break from prison to tell members of Congress how he got away with the scam.
He said he chose to bilk taxpayers because the IRS asks for very little identifying information from online tax filers.
"It's easier from the IRS than a bank, or even calling a department store … call center for a credit card," he said.