IRS tax scams peak as Tax Day approaches

There's been a 400 percent increase in tax scams in the 2016 tax season, and the IRS says it could be even worse.

While you and your employees are filing taxes for 2016, scammers are hard at work trying to dupe businesses and individuals out of their tax returns and personal data.

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According to the IRS, the number of tax scams has already jumped 400 percent during the current filing season, for tax year 2016, compared to last year. As tax day nears, the IRS has issued warnings about the growing threat of tax scams.

In an urgent letter published this month on IRS.gov, the federal agency warned businesses and individuals about "new and evolving phishing schemes." The IRS said it saw email phishing schemes targeting tax professionals, payroll and HR departments, schools, restaurants, hospitals, non-profits, and individual taxpayers.

The most common way crooks steal W-2s is through email phishing schemes, the IRS says. These types of attacks are simple: hackers use a little social engineering and spoof a CEO's or CFO's email address and send a request to an employee in payroll asking for a PDF of all employees' W-2s. The decidedly low-tech method has been duping employees from all types of companies. Last year, data storage firm Seagate, social media platform Snapchat, payday lender Moneytree, and even Inc. magazine's parent company all got hit.

According to the Department of Justice, stolen identity tax refund fraud has affected hundreds of thousands of taxpayers and has cost the United States Treasury billions of dollars.

Employment or tax-related fraud was the most common form of reported identity theft in the U.S. from 2014 through 2016, according to a Federal Trade Commission report released March 2017. Employment- or tax-related fraud made up 34 percent of all types of reported cases over the last two years.

Already this year, 137 companies and organizations have fallen victim to W-2 phishing scams, according to Databreaches.net.

"These email schemes continue to evolve and can fool even the most cautious person. Email messages can look like they come from the IRS or others in the tax community," said IRS Commissioner John Koskinen in a statement. "Taxpayers should avoid opening surprise emails or clicking on web links claiming to be from the IRS."

Like most things in life, the IRS says if it seems too good to be true, it probably is. The agency says to watch out and don't be fooled by unexpected emails about big refunds, tax bills, or requests for personal information.