The other day a relative contacted me in a panic. She told me that she had received a telephone call from the IRS, and that they had issued a warrant for her arrest for tax fraud. The details she provided to me were full of red flag indications that she was the target of a scam, but without a legal background she didn't recognize those signs. I reassured her that no arrest was going to occur and that somebody was trying to cheat her out of money, and she quickly confirmed that I was correct.
Although the details of the scam vary, the three biggest signs that you're being scammed are:
The IRS Will Not Call About Taxes Without Prior Contact - If the IRS determines that you owe taxes, they will most often send you a letter requesting payment and providing you with the opportunity to dispute the assessment or to appeal. They may schedule an audit. But the first attempt to contact you won't be a phone call.
The IRS Will Not Demand Immediate Payment - If you are contacted by the IRS about a tax debt, you will have the opportunity to question the amount they are demanding and to appeal the assessment.
The IRS Will Not Demand Payment by a Specific Method or to a Third Party - The IRS will never ask for a credit card number over the telephone. They will not instruct you to pay by a credit card, a prepaid credit card, or by a wire transfer. The IRS will ask that any tax payment be made to the U.S. Treasury, not to a third party such as a law firm or bill collector. They will not threaten to have you arrested if you do not pay.
If you need additional confirmation that you are being scammed, the list goes on:
Most Tax Enforcement is Civil (Non-Criminal) - Very few tax cases are referred for criminal prosecution, and in most cases those charged with tax fraud know that they have been the target of extensive investigation long before charges are filed.
The Scammers Misrepresent How Arrest Warrants Work - If an arrest warrant has been issued, then your case has gone far past the process of civil tax collection and is in the hands of the IRS Criminal Investigations Division, a U.S. Attorney's office, and the federal court system. There is no way that paying the money that the caller claims is due is going to result in the withdrawal of an actual arrest warrant from a criminal tax case.
They're Making Threats of Consequences the IRS Does Not Enforce - If the caller is threatening that if you don't pay money you'll be deported, that your driver's license will be suspended, or that your business license will be revoked, they're not calling from the IRS.
- p>The Amount of Money Demanded Would Not Trigger a Criminal Case - The amount the scammers will demand from you will be small enough that they can reasonably anticipate that you can pay it quickly. While the amount may be significant, and paying the amount may create significant hardship for a target of this scam, the most frequent amount that victims report being demanded is in the neighborhood of $2,000. In contrast, the unofficial minimum amount for the initiation of a criminal tax fraud case is $70,000.
The IRS commences approximately 3,000 criminal prosecutions each year. With roughly 240 million tax returns filed each year, one in 80,000 ends up being the subject of a criminal prosecution. The IRS is not prosecuting people who are filing their tax returns in good faith over relatively small (alleged) discrepancies.
The fact that the person calling you knows some of your personal information does not mean that they're being honest. Scammers know how to get personal information about their targets, and a scammer can easily know your full name, date of birth, address, place of employment, and even your Social Security Number.
If you are concerned that your caller ID shows the call as coming from the IRS, recall that caller ID can be faked. Scammers may even be calling from overseas, and routing the calls through a proxy in the United States so that the call appears to be from a legitimate source.
If the caller isn't demanding that you pay money, what is it that the caller wants? Are they claiming that there is a problem with your tax refund, and asking that you confirm your name, address, Social Security number, date of birth, or similar personal information? If so, you're being targeted for identity theft. The IRS will not ask you to provide personal or financial information over the telephone.
The answer may seem obvious, but less so if you're panicking: You need to contact the IRS.
If you believe that you may owe taxes to the IRS, get the caller's name and call-back number, hang up the phone, and call the IRS at 1-800-829-1040. If the IRS is in fact trying to collect a tax debt from you, they will confirm that fact. If they aren't -- and if any of the warning signs listed in this article are present, they are not -- you can quickly get some peace of mind.
Similarly, if somebody claiming to be from the IRS leaves a message for you informing you of an urgent need to return their call, call back at the official IRS number, 1-800-829-1040. If the call is real, they can help you.
You may report any fraudulent calls from people claiming to be IRS agents or to be collecting tax debts on behalf of the IRS to the Treasury Inspector General for Tax Administration (TIGTA), and to the Federal Trade Commission.