How to not fall victim to a tax scam

It is a sad fact that, every year, thousands of Canadians become the victims of scams in which fraud artists claim to be representatives of the federal government. Equally sadly, in most cases the money lost is not recovered.

Figures compiled by the Canada Anti-Fraud Centre show that, during 2020, just over 42,000 Canadians became victims of fraud, losing over $100 million. And the pace of such activity is accelerating. In the first three months of 2021, nearly 15,000 Canadians have already become victims of fraud and those individuals have lost, cumulatively, around $50 million. Scams relating solely to the pandemic and pandemic benefits are estimated to have cost Canadians over $7 million. Based on those figures alone, telephone and e-mail scams are clearly big business in Canada.

While fraud has always and will always exist, this past year — and this time of year — represent a perfect opportunity for such scams, 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 promises to “help” them out with those financial difficulties. 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 account for changing conditions has resulted in an inevitable degree of confusion about just who is eligible for what and when, and when repayment of pandemic benefits previously received might be required. That confusion makes it easier for fraud artists to convince their victims of the validity of their “pitch”.

As well, the ongoing lockdowns required by the pandemic have 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 or government websites. Finally, it’s tax filing season, a time of year when receiving communications from the tax authorities wouldn’t strike most Canadians as being out of place, or suspicious, and when, in fact, the tax authorities do communicate with taxpayers for valid reasons. All in all, it’s a perfect storm of opportunity for scammers and fraudsters.

Generally, there are two ways in which fraud artists prey on taxpayers. In the first, the taxpayer is contacted by 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 that e-mail. The link leads, not to a federal government website, but to a “dummy” site closely resembling the actual Canada Revenue Agency (CRA) website. The taxpayer must then, in order to have his or her “refund” or “benefit” processed, provide personal and financial information which can then be used by the tax scammer.

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 owes money to the CRA or some other agency of the federal government, and that immediate payment must be made. 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 now 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 the CRA, he or she will be first advised of that fact by mail and never by telephone — most often in his or her Notice of Assessment for a tax return filed. Second, the CRA would never suggest or require that a taxpayer send funds to them by wire transfer or by using a prepaid credit card. Any payment of money owed to the CRA is made online, through the CRA website, through the taxpayer’s financial institution (in person or online), or by mailing a cheque to the CRA. Finally, any suggestion that the CRA 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 and phishing attempts that are carried out using the CRA’s name and new ones, which appear frequently, are usually identified on the CRA website at https://www.canada.ca/en/revenue-agency/corporate/security/protect-yourself-against-fraud.html and https://www.canada.ca/en/revenue-agency/campaigns/fraud-scams.html. Unfortunately, many such scams originate outside Canada, limiting the ability of the CRA and 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, even 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 will never:

• ask for personal information of any kind by email or text message (the CRA does not, in fact, ever use texts or any other instant messaging to communicate with taxpayers);
• request payment by prepaid credit cards;
• 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 himself or herself the following:

• Am I expecting more money from the CRA?
• Does this sound too good to be true?
• Is the requester asking for information I would not provide in my tax return?
• Is the requester asking for information I know the CRA already has on file for me?
• Why is the caller pressuring me to act immediately? Am I certain the caller is a CRA employee?
• Did I file my tax return on time? Have I received a notice of assessment or reassessment saying I owe tax?
• Have I received written communication from the CRA by email or mail about the subject of the call?
• Does the CRA have my most recent contact information, such as my email and mailing address?
• Is the caller asking for information I would not give in my tax return or that is not related to the money I owe the CRA?
• Did I recently send a request to change my business number information?
• Have I received a statement of account about a government program I owe money to, such as employment insurance or Canada Student Loans?

While it was once possible, using call display, to see the number of any caller in order to verify that it was indeed a CRA number, that is no longer the case. Telephone scammers have taken advantage of technology which enables them to have the actual number of a CRA office or service displayed on the call recipient’s call display, making it that much more difficult to identify the caller as a scammer. As well, a scammer will often leave a voice mail with a phone number at which the taxpayer can reach them. In both cases, the correct response is the same. The recipient of the call should call the CRA Individual Income Tax Enquiries line at 1-800-959-8281. Service agents at that line will be able to access the taxpayer’s tax records and provide information on whether the taxpayer does indeed owe any funds to the CRA, or is entitled to a tax refund. As well, taxpayers who receive what seems to be a suspicious communication should report that by e-mail to info@antifraudcentre.ca — or they can call the Canadian Anti-Fraud Centre at 1-888-495-8501.

If the worst has already happened, and the taxpayer has been scammed, the best course of action is to report the scam to local law enforcement, to contact the Canadian Anti-Fraud Centre toll free at 1-888-495-8501 or through the Fraud Reporting System (FRS), and to report the incident to the financial institution where the money was sent (e.g., money service business such as Western Union or MoneyGram, bank, or credit union, credit card company, or internet payment service provider). It’s also prudent to place flags on one’s bank account and report the scam to both credit bureaus, Equifax and TransUnion.

Finally, the unfortunate fact is that victims of fraud are often targeted a second or third time with the promise of recovering money previously lost. The advice from the Canadian Anti-Fraud Centre is never to send money to recover money.

Ironically, the extent to which most individuals are now comfortable transacting their tax and financial affairs online or over the phone, and the speed and anonymity of such transactions, has made it easier in many ways for fraud artists to succeed. 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 verifying the legitimacy of the request.