Recognizing Tax Collection Scams

Earlier this year I needed to update the appraisal for my violin for insurance purposes. My violin was made by a maker from a family of well-known luthiers, and its value depends on proving its provenance back to that maker.  

 Fortunately, I have a certificate of authenticity from renowned Philadelphia violin dealer William Moennig & Sons, from whom I purchased the violin many years ago. Not only is a Moennig certificate respected in the violin community, but I understood that Moennig had obtained my instrument directly from the luthier who made it. That makes the certificate all that more valuable in demonstrating the instrument’s provenance.  

 When I went to get the certificate, and quickly concluded it wasn’t where I thought I had put it. I panicked. Although it had been a fixture in the violin field for 100 year, Moennig closed in 2010. There was no way to obtain a replacement certificate.  

 After many days of panicked searching, I went back to the place I had originally looked. Lo and behold, the certificate was there. I had been right about the certificate’s location the entire time but in my panic I had questioned myself.  

 A Phone Call From the IRS 

 Despite being diligent about filing tax returns and paying taxes on time, a few years ago, I was the victim of identity theft. A scammer filed a fraudulent tax return using my Social Security number and almost successfully received a large refund under my name. Since the scammers obviously have my Social Security number, I have a special PIN I must use to file my tax returns and communicate with the IRS.  

 This experience has made me hyper-vigilant about scams. I even have an app on my phone which blocks phones numbers known to belong to scammers and warns me of suspicious calls. 

 Yet, a few weeks ago, I received a voicemail on my cell phone from someone who said he was with the IRS. He claimed I owed past due taxes and that I needed to call back immediately to prevent criminal prosecution for tax evasion. 

 The caller who left the voicemail had made it past the block of known fraudulent numbers. The call wasn’t even marked as suspicious. Adding to the legitimate appearance of the call was that the caller left a message with a callback number, something scammers rarely do.  

 Fortunately, I receive daily IRS emails for tax professionals. I knew this call had the characteristics of a common tax collection scam. Yet, something inside still compelled me to listen to that robotic voicemail message twice before I was comfortable hitting the “delete” button.  

 For just a moment, I reacted like I did when I did not immediately see my violin certificate. I questioned myself. I thought perhaps despite my efforts, I had slipped up and failed to pay some taxes. 

 It’s easy to understand why someone without my background might call the number in the voicemail. Once on the phone, the scammers sound convincing as they tell innocent taxpayers they owe back taxes. Once the taxpayers were convinced they might be arrested, it would not be difficult for the scammer to pry credit card numbers and other personal information from them if they thought it would solve the problem. 

 This article discusses how to detect common income tax scams and how to prevent from becoming a victim. Nonpayment of employment or fiduciary taxes is beyond the scope of this article. 

Hallmarks of Common Tax Scams 

 Many tax scams use one or more of the following techniques to scare taxpayers into paying money or giving out personal information: 

  • Communication Method– Many scammers first contact the taxpayer by telephone, email, text, or social media. The IRS doesn't make its initial contact with taxpayers by telephone, email, text messages, or social media channels to request personal or financial information. 

  • Request for Personal Information–Scammers may ask for personal information, such as your name, address, birth date, or Social Security number, claiming they need it to verify your identity.  

 The IRS does not request personal information when it initiates the communication. If a taxpayer contacts the IRS through the phone number on the IRS website, the IRS may ask you for identifying information. The IRS will not call, email, text, or IM you asking for personal information.  

  • Demand Immediate Payment–Scammers frequently demand payment immediately. The IRS generally sends a bill by mail. The IRS will not demand immediate payment over the phone. 

    Under rare circumstances, the IRS may call or appear at a home or business unannounced. However, that IRS representative should not demand payment to anyone except the US Treasury.   

  • Payment Method–Scammers frequently request payment via debit card, gift card, wire transfer, or a similar method. This enables the scammers to disappear without a trace with the taxpayers’ funds.  

The IRS does not require that personal income taxes be paid via debit card, gift card, or wire transfer. The IRS does accept some debit and credit card payments and ACH payments (similar to wire transfers) through its website, but the IRS will not request payment information over the phone or via email or text message. The IRS will not accept payments via gift card, nor will the IRS accept payment over the phone or via email.  

  • Payment to Someone Other than US Treasury–All tax payments are to be made to the US Treasury and not to any other organization or individual. On rare occasions, the IRS might use outside collection companies, but even they should not request that payments be sent to them. All tax payments should be made to the US Treasury.  

  • Threats of consequences–Scammers may threaten taxpayers with arrest, deportation, home foreclosure, driver’s license revocation, loss of a passport, or other similarly dire consequences if amounts are not paid immediately.   

Unpaid taxes can have financial consequences including foreclosure and can result in passport revocation. And tax fraud or evasion can result in arrest. However, the tax collection process involves several steps and rarely moves quickly.   

If you file tax returns, the IRS knows where to find you. Taxpayers usually receive numerous mail notices from the IRS and have appeal rights before the IRS seizes assets.  

Protecting Yourself Against Scams 

I don’t know how the scammers obtained my personal information. It likely was from a security breach like that experienced by Equifax (by which I also was affected).  

When there are breaches into databases of major retailers, the federal government, and credit reporting companies, personal information will get into the hands of scammers. Taxpayers cannot prevent that, but they can learn to recognize the telltale signs of a scam.  

Just as my panic at not seeing the violin certificate at first glance caused me to overlook it altogether, a panicked reaction to a supposed IRS inquiry can cause a taxpayer to overlook telltale signs of a scam. Taxpayers should stop and take a few minutes to think before responding to a supposed communication from the IRS. Taxpayers should consider whether the communication has any of the characteristics of a fraudulent call.  

If there is any doubt, they should contact the IRS at 800-829-1040 to verify that the inquiry is actually from the IRS. If the call was from the IRS, a few minutes delay will make no difference in the result. However, if the call was from a scammer, the information the taxpayer reveals in that time can have devastating results.  

 

© 2018 by Elizabeth A. Whitman 

Any references clients and their legal situations have been modified to protect client confidentiality. 

DISCLAIMER: The content of this blog is for informational purposes only and does not provide legal advice to any person. No one should take any action regarding the information contained in this blog without first seeking the advice of an attorney. Neither reading this blog nor communication with Whitman Legal Solutions, LLC or Elizabeth A. Whitman creates an attorney-client relationship. No attorney-client relationship will exist with Whitman Legal Solutions, LLC or any attorney affiliated with it unless and until a written contract is signed by all parties and any conditions in such contract are fully satisfied.