Iowa

Tax Fraud Scheme Targets Social Security Recipients

Authored By: Iowa Legal Aid LSC Funded
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The facts about tax refunds: If your only income is SSDI and you didn’t have any taxes withheld or your only income is SSI, it is not likely you will be getting a tax refund. Tax scammers may try to convince you otherwise, but they are wrong.

“Free Money”

There was a special “economic stimulus” credit in 2008 that SSI and SSDI recipients could claim on their tax returns. Many people filed returns and got refunds that year. That was a special credit offered for just that year. Unfortunately, some scammers use this one-time event to trick people into believing that there is “free money” people can get if they file a tax return. This scam targeting SSI and SSDI recipients is so common it hit the IRS “Dirty Dozen” list of tax scams in 2013.

“Phony income”

 A scammer might prepare a return reporting your SSDI or SSI benefits on a Schedule C. The preparer may invent income or report that you paid estimated taxes when you didn’t. All of this comes with the promise of a large refund. In reality, you will be left picking up the pieces. Social Security Administration (SSA) may cut your benefits because it looks like you are working. SSA may ask you to pay back your social security benefits. The IRS might ask you to pay back the refund with added penalties and interest.

What to do if someone says you qualify for a credit and you haven’t heard of it, or you are suspicious:

  • you can call the IRS at 800-829-1040 and ask an IRS representative; or
  • you can check with Iowa Legal Aid’s Low-Income Taxpayer Clinic (LITC) at 800-532-1275. Clinic services are free to qualified individuals. The LITC helps educate taxpayers about their rights and responsibilities and helps taxpayers in tax trouble.
  • If you need to file a tax return, call 2-1-1 to find free tax preparation offered by certified volunteers.
     
Last Review and Update: Apr 15, 2013