Artificial intelligence creating more sophisticated tax scams | Samuel French

As technology development experts charge forward in an international dash to create more effective and useful artificial intelligence, among those neck and neck in the race are increasingly sophisticated AI-powered scams to steal your tax refund.

It’s also an even greater reason to in the future file your business and personal tax returns at the earliest possible moment. Filing early gives the criminals less time to file a fake return under your name. With tax season 2024 ending (except for approved extensions), and with AI scams more pervasive every day, it’s worth looking ahead to consider how to approach tax filing in 2025.

For years, identity thieves attempting to impersonate the IRS have principally used email, texts and phone calls to steal tax refunds. These scams were sometimes unmasked by potential victims because they were badly done, contained misspellings, sounded as if they were coming from a telemarketing call center – and because the targets knew the IRS will never call or email requesting payments or sensitive taxpayer information. But many scams are quite slick. Many taxpayers have fallen victim to them.

Now, AI-generated communications that look and sound official ‒ and are churned out in ever-faster and larger quantities ‒ are tearing through the ranks of taxpayers at new levels of skullduggery.

Axios.com gives a concise and useful description of the ever-evolving AI threat: “Tax season fraud is set to spike in 2024 as AI enables cybercriminals to generate lifelike images and make convincing videos that impersonate taxpayers to steal their refunds.

“Why it matters: Victims of tax-related identity theft wait an average of 19 months for the IRS to correct and send their refunds.

“How it works: Scammers gather information about you — like pictures, addresses, employment status and other personal data — that is either publicly posted, available in legal or illegal databases, or stolen through email phishing.”

All those personal things about you in the public record, obtained in computer system hacks and that you voluntarily share through social media outlets, can be compiled by AI to produce a lifelike representation of you for phony tax refund purposes. After that, scammers send a fake tax return – with your name on it – to the IRS before you have perhaps even started to prepare your return.

And then, when your legitimate tax return with a tax refund is filed, it’s not a matter of clicking on a box that says “I am not a robot.” Instead, it’s an extended process of, in a way, proving you’re innocent, even though the scammers are guilty.

It’s not only taxpayers who are pursued by thieves: professional tax preparers have to be on their guard as well. A scenario: a tax professional has an email pop up on their computer screen. It looks every bit like an email from a longtime individual or business client; it may even have a personal reference or information that gives it even greater validity. The purported taxpayer is asking a question about some aspect of their tax-related history or status. The question is answered in a response email. And the criminals have scored another information capture.

Electronic security company McAfee, in its “2024 Tax Scam Study,” compiled data on states and scam-related responses: “The Top 5 Refund Clicking Capitals – the states where the highest percentage of people who received a fraudulent email or text message about 'your tax refund' or 'tax refund e-statement' also clicked on a scam link to a fake refund or statement – are:

1. Alabama, Colorado, New York (tie): 94%

2. Georgia: 92%

3. Rhode Island: 91%

4. Arkansas, West Virginia (tie): 89%

5. Florida, Iowa, Texas (tie): 88%

“Additionally, the Top 5 Tax Preparation Clicking Capitals – states where the highest percentage of people have clicked on a scam link in a fraudulent message from someone purporting to be a tax preparation software company – are:

1. West Virginia: 88%

2. Texas: 87%

3. Colorado: 74%

4. New York: 71%

5. Massachusetts, Idaho (tie): 67% “

As scams become increasingly complex, the advice is simple: don’t, under any circumstances, ever, share personal financial information with anyone, at any time, if you are not 100% certain of the identify of the person or organization contacting you. That doesn’t mean pretty sure: it means absolutely sure. And if a request comes claiming to be from the IRS, the first thing to do is directly contact the IRS – and not by reply email or text. Remember, the IRS isn’t going to send an email or text, nor will its agents call, to obtain financial information or to demand a payment.

Think of AI-generated tax scams as the equivalent of holograms of people that we see in science fiction movies and on television. The images, voices and mannerisms look exact, but when the image is touched, it disappears. Because it wasn’t real.

Unfortunately, the money scammers make off with from bamboozled taxpayers is all too real. Make sure who you’re dealing with is who you think you’re dealing with, and report any scam attempts to the proper authorities. It’ll help them in the continuing race to try to stay ahead of AI’s criminal uses.

Samuel French is president of Rodefer Moss & Co. PLLC, a two-state accounting firm based in Knoxville. The company’s website is rodefermoss.com.

This article originally appeared on Knoxville News Sentinel: Samuel French: AI is creating more sophisticated tax scams