Fake Tax Debt Scams Could Get Even More Dangerous

New Law Telling IRS to Use Private Debt Collectors Could Help Scammers

The Internal Revenue Service Building in Washington, DC
The Internal Revenue Service Building in Washington, DC. Buyenlarge / Getty Images

Every year around tax time you hear warnings of thieves posing as Internal Revenue Service (IRS) agents on the phone demanding immediate payment for non-existent tax debts. Well thanks to the U.S. Congress, that threat may soon get even more dangerous.

As part of a federal highway improvement funding bill passed in late 2015, Congress instructed the IRS to hire private debt collection firms to go after certain overdue tax payments.

Following the hot trend in government of replacing regular employees with contractors, supporters of the measure argued it would help collect more money at less cost to the government.

In a statement issued after passage of the bill, Sen. Chuck Grassley (R-Iowa) said the move would give the IRS “a tool to pursue these unpaid taxes while respecting taxpayer privacy and rights.”

IRS Begged to Differ

Not as thrilled with the idea as Sen. Grassley, IRS Commissioner John Koskinen warned at the time that using contract debt collectors would make it more difficult for taxpayers to tell the difference between actual government tax collectors and con artists.

Before passage of the law, the IRS initiated tax debt-related contact with taxpayers by regular mail only, rather than by telephone or email, thus making it easier for taxpayers to identify telephoning thieves claiming to be IRS agents.   

How the IRS is Fighting the Thieves

But there is hope for the good guys, according to Treasury officials.

On March 17, 2016, the Treasury Department’s Inspector General for Tax Administration (TIGTA), J. Russell George reported that anti-scam countermeasures being taken by his office had been effective in at least making it harder for thieves posing as IRS collection agents to victimize taxpayers.

“Where the perpetrators used to be able to get a victim every 40-50 calls, now they must make 300-400 attempts to claim a victim,” he stated.

TIGTA’s counter measures consist of:

  • Using automated dialers to call the scammers back and basically tell them they are breaking the law and to knock it off or go to jail;
  • working with phone companies to shut down the telephone numbers used to place the illegal calls;
  • publishing the crooks’ phone numbers on the Internet; and
  • efforts to educate taxpayers about the fake IRS agent scam, through resources like this Public Service Announcement on YouTube.

“Our best chance at defeating this crime is to educate people so they do not become victims in the first place,” Mr. George said. “Every taxpayer we protect from this crime is a victory.”

 

But despite these countermeasures, George conceded the problem is still “the largest, most pervasive impersonation scam in the history of our agency.”

How Big is the Scam?

On March 8, 2016, Inspector General George told Congress that since October 2013; more than 5,400 victims had lost almost $29 million to scammers claiming to be collecting back taxes for the IRS, an average theft of $5,370 per victim.

The scammers tell their victims that unless they make immediate payments using prepaid debit cards, money orders or wire transfers, they could suffer punishment raging from losing their driver’s license to being arrested.

“While we plan on arresting and prosecuting more individuals, the scam will not stop until people stop paying the scammers money,” George told lawmakers.

But according to Sen. Grassley, chairman of the Senate Judiciary Committee, far from enough scammers are being arrested.

“Despite the scope and prevalence of the IRS impersonation scam,” he stated in a letter to Deputy Attorney General Sally Quillian Yates, “the Department of Justice to date has prosecuted a very limited number of individuals for conduct related to these scams.”

On March 21, 2016, the IRS released its “Top 10 Identity Theft Prosecutions for Fiscal Year 2015” report showing that during Fiscal Year 2015, the IRS initiated 776 identity theft related investigations that resulted in 774 convictions with sentences up to 27 years in prison.

How to Protect Yourself from the Scams

Inspector General George offered some important protective advice for people who get calls from anyone claiming to be with the IRS demanding a payment, or their credit card or bank account information. The main theme in all of them is “Hang up.”

  • If you know or think you might actually owe unpaid taxes -- hang up -- and call the IRS at 800-829-1040 to make sure real IRS workers are helping you with payment options.
  • If you know you do not owe any unpaid taxes -- hang up -- and fill out an “IRS Impersonation Scam Form” on TIGTA’s website, www.tigta.gov or call TIGTA at 800-366-4484.
  • In addition you can file a complaint using the Federal Trade Commission’s online Complaint Assistant, being sure to add “IRS Telephone Scam” to the comments of your complaint.

Finally, Inspector General George advises taxpayers that the IRS will never request personal or financial information by e-mail, text, or any social media. Suspected scam emails should be forwarded to the IRS at phishing@irs.gov.

And as always, never click on any links or open any attachments in any email you suspect of being a scam of any kind.