For a few years, a ring of criminals believed by the U.S. government to be based in India have been involved in a pervasive tax scam. Callers impersonate IRS officials, connect with American taxpayers, and convince many that they have an outstanding bill for tax payments.
The scam has been so pervasive that it has generated more than $15 million from panicked taxpayers.
CNN offers a story from a recent victim of the scam:
One of those victims was former NFL player Frank Garcia, who is now a sports radio host in Charlotte, North Carolina. When he got the call, it sounded so authentic, he left the radio station in a panic, scramming to get the money they wanted.
“The only thing running through my head is, I’m going to jail. I’m gonna be on television, in handcuffs, for tax evasion,” he recalled. “I had to follow specific steps not to be arrested. That the authorities had been contacted and in fact, they are on the way and will be there in 30 minutes.”
Garcia says he spent five hours driving to various stores around Charlotte, depositing $500 each time into a PayPal account set up by the woman on the phone. He ended up losing about $4,000.
Public figures tend to be more anxious than most people about being guilty of a crime. The destruction of a career in the public eye and a happy life is easy given the public taste for scandal and the American system of justice through trial by media.
And when you believe you might be in major trouble, the ability to think rationally sometimes disappears. To a reader, the idea that the IRS would have a PayPal account to collect past due tax bills sounds fishy, if not ridiculous. But in the heat of the moment, when you’re being threatened with jail time, you just want to problem to go away, and all possible resolutions sound legitimate.
the prevalence of media warnings about the scam has certainly helped slow down the perpetrators’ attack on taxpayers. I’ve even seen warnings on my local news broadcasts (but it probably won’t be totally effective and pervasive until reality show producers incorporate scam warnings into their shows).
Money offers a few tips, summarized below, for preventing yourself from being a victim of this scam, so while knowledge does help, as I’ve already mentioned, under stress logical reasoning often fails.
Scammers spoof caller I.D. The call may be coming from somewhere on the other side of the world, but the caller I.D. might say it’s coming from a number with a 202 area code (Washington, D.C.).
In reality, the IRS does not call taxpayers, and the organization especially doesn’t call taxpayers to inform them of an overdue tax bill. If a taxpayer truthfully owes tax, the IRS sends a bill, and offers instructions for the taxpayer to respond.
But I get how people can fall for this. Sometimes the U.S. Postal Service isn’t reliable. Sometimes you accidentally discard legitimate mail, mistaking it for junk mail. A caller can easily convince someone that they had sent notices through the mail which, from their perspective, were ignored.
Scammers ask for immediate payment. The real IRS doesn’t ask for payment over the phone, and are not in the business of setting up PayPal accounts to receive the funds or of instructing taxpayers to purchase prepaid debit cards. The IRS takes personal checks sent to official addresses and electronic payments through a government gateway, the Electronic Federal Tax Payment System (EFTPS) or DirectPay. That’s it.
This fact doesn’t change for taxes owed from previous years, even if you settle with the IRS for a lesser amount.
Even to taxpayers falling for the scam, it sounds like the callers are working somewhat outside the “system,” especially when they agree to settle. So an alternative form of payment might not raise any red flags.
Scammers threaten to arrest or deport their victims. The IRS wouldn’t do that. But it’s hard to believe this is not an IRS tactic when we know from media reports that tax evasion is a crime that results in arrest and deportation. If the scammers make victims believe that they could be guilty of tax evasion, the fear of being arrested is in their mind before the scammers “confirm” that will be the result of failing to pay.
And if you happen to be an immigrant fearing deportation, either because you are in the country illegally or believe it’s easy to be mistaken for someone in the country illegally, the threat of deportation could be so frightening (especially if you are escaping a dangerous home country) that you’re willing to do anything to remain in the United States.
Here’s what happens when you really do owe back taxes.
First, if you earn a paycheck from an employer and haven’t filed your taxes, the IRS will eventually catch on, and you will be expected to pay what you owe if you haven’t already through paycheck withholding. If you have paid taxes every year you owe taxes, but haven’t paid enough, you will still be expected to pay the remainder of what you owe.
The IRS will send you a notice in the form of a bill, identifying how much the government believes you owe and give you a deadline to pay. You will owe penalties and interest beginning with the date that tax payment was due, and that will be included on the bill.
If you disagree with the IRS assessment, you can call the IRS at 800-829-1040 to discuss the matter. But if you do owe the money, you will have to come up with some solution to pay. That solution could be paying immediately, as the IRS requests, agreeing to an installment plan, where you can pay the taxes over a period of time, or coming up with an offer in compromise.
The offer in compromise is available to people with a financial hardship, but the IRS must determine it would never be able to receive the full amount of tax owed.
If none of the above can resolve the issue, the IRS can resort to filing a federal tax lien, a legal claim to your property. The IRS may issue a levy, seizing your wages or bank accounts. These can continue until your tax bill is paid in full or the IRS can no longer legally seek repayment. You can lose your house, your retirement funds, and your income.
Because these consequences are so dire, it’s understandable that people are on edge when they receive a call purportedly from the IRS and therefore vulnerable to this widespread and successful scam.
Have you received one of these calls from someone claiming to be from the IRS? What happened on the phone call?
Published or updated March 17, 2015.