Tax Scams: Be on the Alert for IRS Impersonation Fraud
The IRS publishes Informational Releases regarding scams that are directed at taxpayers and tax professionals. Many of these scams attempt to impersonate the IRS. To raise awareness of fraud, this article will cover some of the characteristics and deceptions used by these scammers. Below is a brief description of the various deceptions used by criminals.
These schemes are targeted at taxpayers to either obtain money or sensitive personal information by impersonating the IRS. The scammers send, emails, text messages, or phone calls that seek personal information by deceiving the taxpayer that there is an outstanding tax liability that must be paid immediately to prevent immediate arrest, criminal prosecution, the garnishment of wages, and the seizure of personal property or business assets.
A Similar deception is the “tax refund” scam, where the fraudster falsely informs the taxpayer that they have an outstanding refund from the IRS and it can only be paid by providing personal and financial information to the caller, text message, or website. Like the tax liability scam, the perpetrator seeks to obtain sensitive information that will be used to establish fraudulent credit cards, bank accounts, or government payments, such as Social Security or Medicare.
To avoid being the victim of an IRS impersonation scam it should be known that the IRS will never initiate a payment or refund request by telephone, email, or text message. The IRS will always send a formal notice by mail. Also, the IRS does not:
- Call to demand immediate payment using a specific payment method such as a prepaid debit card, gift card, or wire transfer. Generally, the IRS will first mail you a bill if you owe any taxes.
- Threaten to bring in local police or other law enforcement to have you arrested for not paying.
- Demand payment without giving you the opportunity to question or appeal the amount at issue.
- Ask for payment by gift card, credit, or debit card numbers over the phone.
Phishing Emails Directed at Students
This phishing email targets university and college students that have email addresses ending in “.edu”. The scammer claims that the individual has a pending refund with the IRS and to obtain the refund they must provide personal information to a website contained in an email link. The phishing website will request: the Name, Social Security Number, Date of Birth, Address, Driver’s License Number, and Current Address. In addition, the scammer may request personal information of the student’s parents, which the student might unwittingly supply.
Phishing Email Directed at Tax Professionals
The IRS notes that more than 90% of all data thefts start with a phishing email. Tax professionals are being targeted with a tactic called spear phishing. The spear-phishing email poses as a trusted source that “baits” the recipient into opening an embedded link or an attachment. The email may request the tax professional to update tax software or cloud storage, however, the link or attachment is a website controlled by the thief. The malicious link may infect the firm’s computers and networks that seek client data or bank accounts related to the firm. Additionally, tax firms may receive emails from prospective clients to review spreadsheets or links to data to solicit services, however, these emails contain viruses, ransomware, or other software designed to damage the firm’s computer system.
The IRS advises taxpayers to be watchful for scammers who set up fake charitable organizations to take advantage of taxpayers’ generosity. The scammers take advantage of tragedies and disasters, such as the COVID-19 pandemic. Often these scams are done over the phone and pressure the taxpayer to make a donation – and stress its tax deductibility. A legitimate charity will take donations at any time, without pressure. Also, many of these phony charities ask for payment by gift cards or wire transfer, which is not traceable. It is safest to pay by credit card or check — and only after having done some research on the charity. Donations made to unqualified charities are not tax-deductible. To check the status of a charity, use the IRS Tax Exempt Organization Search Tool, located on the IRS website to verify a charity.
Offer In Compromise (OIC) Mills
Taxpayers should beware of promoters claiming their services are needed to settle their tax debt with the IRS and that their tax debt can be settled for “pennies on the dollar” or that there is a limited window of time to resolve tax debts through the OIC program. These OIC Mills distort the fact that many taxpayers can accomplish it on their own or through a trusted CPA firm. These Mills advertise on TV or radio and claim that they can obtain significantly discounted settlements with the IRS. Often, these Mills require the taxpayer to pay for the service in advance – when in fact – the taxpayer does not qualify for the OIC program. Taxpayers can go to IRS.gov and review the Offer in Compromise Pre-Qualifier Tool to see if they qualify for an OIC. It should also be known that under the First Time Penalty Abatement policy, taxpayers can go directly to the IRS for relief from a potential penalty.
Immigrant / Senior Fraud
IRS impersonators are known to target groups with limited English proficiency as well as senior citizens that have limited access to information or are isolated from friends and family. These scams are often threatening in nature. the IRS impersonation scam remains a common ploy. This is where a taxpayer receives a telephone call threatening jail time, deportation, or revocation of a driver’s license from someone claiming to be with the IRS. Taxpayers who are recent immigrants often are the most vulnerable and should ignore these threats and not engage the scammers. Also, seniors are threatened to have Social Security, Medicare, or Medicaid payments seized if payment is not immediately made. As noted above, contact made by the IRS is through the mail – not the phone. Also, taxpayers that are more comfortable in a language other than English can file Schedule LEP to select a preferred language to communicate in with the IRS.
If you would like to discuss the potential impact of any of these scams on you or your business, please call RVG & Company at 954.233.1767.