Protecting yourself from tax and benefit scams

It’s an acknowledged reality that times of crisis bring out both the best and the worst in people. While most Canadians would never consider using the current pandemic as a means of defrauding others, this is not, unfortunately, true of everyone.

This is a time when Canadians are particularly vulnerable to scammers and fraud artists, for a number of reasons. First, of course, is the financial dislocation which has resulted from the pandemic — many Canadians have lost income and may be in real financial difficulty, making them especially vulnerable to fraudulent communications indicating that there is money available to them. Second, the federal government has instituted a great number of programs to provide financial assistance to those hit hard by the pandemic. The sheer number of those programs, however, and the fact that they have had to be revised frequently to take account of changing conditions has resulted in an inevitable degree of confusion about just what is available, who is eligible for the different benefits, and how to claim them. That confusion makes it easier for fraud artists to convince their victims of the validity of what they are “offering”. It also makes taxpayers vulnerable to phone calls or voice mails in which they are, in effect, accused of receiving benefits to which they were not entitled and demanding that they send funds in repayment.

In addition, the pandemic has made it necessary for Canadians to manage just about everything online or by phone, opening up opportunities for fraudsters to misrepresent themselves as government officials through e-mail or telephone, or to create fake “government” websites. Individuals who are not accustomed to managing their financial affairs in the online world are especially vulnerable right now to these approaches. Finally, since the filing deadlines for income tax return for the 2019 tax returns have passed, the Canada Revenue Agency (CRA) will, as happens each year, be contacting some taxpayers seeking clarification of income amounts reported or documentation of deductions or credits claimed on the annual return. Consequently, it wouldn’t necessarily strike taxpayers as unusual to receive, at this time of the year, a communication purporting to be from the CRA, with a message regarding that person’s taxes. All in all, 2020 represents a “perfect storm” of opportunity for scammers and fraudsters.

The federal government has already identified at least one specific scam which has arisen in relation to pandemic benefits. Canadians have received a text message indicating that a deposit has been made to their bank account, representing benefits under the Canada Emergency Response Benefit (CERB) program. The message is invariably fraudulent, as the federal government does not, under any circumstances, contact taxpayers by text. Recipients should not click on the link provided and should delete the text entirely.

When receiving a communication of any kind from someone purporting to be from the federal government, a taxpayer should ask themselves the following questions.

Is the federal government likely to be contacting me in this way?  In most cases, the federal government communicates with taxpayers by regular mail or, if the taxpayer has signed up for online communication, through the taxpayer’s online account with Service Canada (for pandemic-related benefits, Canada Pension Plan, Old Age Security, or Employment Insurance) or the CRA (for all income tax related matters). The federal government does not and has never communicated with taxpayers by text. While the CRA and Service Canada will communicate with taxpayers by telephone, there are ways in which a taxpayer can ensure that the call, and the caller, are legitimate.

Anyone calling from a government department or agency should be able to identify themselves, if not by name, then by employee or agent number. Second, they should be able to provide a telephone number at which they can be called back.(It’s important to note that call display cannot be relied on to accurately identify the source of the call, as scammers have been able to manipulate call display to show actual government phone numbers.) Finally, if the caller really is from the federal government, then they should already have certain information about the taxpayer they are calling — at a minimum the taxpayer’s social insurance number. If they don’t, and they request that information from the taxpayer, it’s a sure sign that caller is not who they claim to be. If the taxpayer has any doubt about the legitimacy of the call or the caller, and especially if a demand for money is made, the best course of action is to hang up and place a call to the particular government department or agency to verify the legitimacy of the initial call. For that purpose, the CRA’s individual income tax help line number is 1-800-959-8281. If the suspect call received was about the Canada Emergency Response Benefit, and the taxpayer has questions about his or her current or past eligibility for the benefit, he or she should call the CERB at 1-833-966-2099. If the call or e-mail was clearly fraudulent, it should be reported to the Canada Anti-Fraud Centre at 1-888-495 8501.

The Service Canada numbers (both of which are toll-free) to call are as follows:

• Canada Pension Plan and Old Age Security: 1-800-277 9914
• Employment Insurance: 1-833-966-2099

Generally, there are two ways in which financial fraud artists prey on Canadians. In the first, the taxpayer is contacted, by phone, text, or e-mail and advised that he or she is owed money by the federal government. In order to receive the money owed, the taxpayer must click on a link in the e-mail or text, or to provide financial information (like a bank account number) over the phone. The e-mail or text link leads to a “dummy” site closely resembling the actual CRA or Service Canada website. The taxpayer must then, in order to have his or her “refund” processed, provide personal and financial information which can then be used by the scammer to gain access to their bank accounts.

The second approach, and one which has been used with great success over the past few years, is to falsely inform the taxpayer (this time, usually by telephone) that he or she has received benefits or a tax refund to which they are not entitled and that the money must be repaid immediately to the federal government. Since literally millions of Canadians have received pandemic-related benefits over the past four months, Canadians are particularly vulnerable to a scam like this right now. A failure to pay, the taxpayer is told, will mean seizure of his or her assets, cancellation of his or her passport and/or social insurance card or other government-issued identification, deportation or imprisonment. Further, such payment must be made only by wire transfer or pre-paid credit card. This type of fraud has become so ubiquitous, in fact, that many businesses which provide money transfer services post warnings on their premises to would-be users of the need to be aware of the fraud risk.

There are, in fact, several things about such a phone call that should alert the recipient to the fact that it’s not legitimate. First of all, if a taxpayer does owe money to any department or agency of the federal government, he or she will be first advised of that fact by mail and never by telephone. Second, there is no agency or department of the federal government that would suggest or require that a taxpayer send funds to that agency by wire transfer or by using a prepaid credit card. Any payment of money owed to the federal government is made online, through a legitimate government website, through the taxpayer’s financial institution (in person or online), or by mailing a cheque. Finally, any suggestion that the federal government would (or could) cancel a taxpayer’s passport or other government issued ID for failure to make payment is simply ludicrous.

There is almost no limit to the number and variety of scams, frauds, and phishing attempts that are carried out using the name of the CRA or Service Canada and new ones, which appear frequently, are usually identified on the CRA website at http://www.cra-arc.gc.ca/scrty/frdprvntn/menu-eng.html and on the Service Canada website at https://www.canada.ca/en/employment-social-development/corporate/portfolio/service-canada/fraud.html. Unfortunately, many such scams originate outside Canada, limiting the ability of law enforcement authorities to monitor or stop them. For the most part, therefore, the onus will fall on individual taxpayers to protect themselves, through a healthy degree of caution and skepticism.

The CRA suggests that, in order to avoid becoming a victim of such scams, taxpayers should keep the following general guidelines in mind.

The CRA and Service Canada will never:

• ask for personal information of any kind by email or text message;
• send an e-mail or text with a link to be used;
• request payment by prepaid credit cards;
• ask for a taxpayer’s credit card information;
• give taxpayer information to another person, unless formal authorization is provided by the taxpayer; or
• leave personal information on an answering machine.

When in doubt, a taxpayer should ask him or herself the following:

• Did I sign up to receive online mail through My Account or My Service Canada Account?
• Did I provide my email address on my income tax and benefit return to receive mail online?
• Am I expecting more money from the CRA or Service Canada?
• Does this sound too good to be true?
• Is the requester asking for information I would not be asked for in my tax return (like a credit card number)?
• Is the requester asking for information I know the CRA or Service Canada already has on file for me (e.g., my social Insurance number)?

As ever, the best defence against becoming a victim of such fraud artists is by refusing to provide personal or financial information, and especially never to make any kind of payment, whether by phone, e-mail, or online, without first contacting the particular government department to verify the legitimacy of the request.