IRS impersonator scams feel real if you don’t understand the real IRS
Taxpayers can avoid IRS impersonator phone scams by knowing how the IRS really works
The taxpayer’s phone rings. The call is from a Washington, D.C. area code. The taxpayer answers. The caller claims to be an IRS Collection agent and demands payment on an unpaid balance the taxpayer owes. The caller sounds official and threatens criminal sanctions if the taxpayer doesn’t pay the balance immediately, the taxpayer hangs up and promptly gets a local call from a person claiming to be a law enforcement officer, demanding payment. Out of fear and misunderstanding, the taxpayer pays the requested sum -- and has been scammed by an IRS impersonator.
IRS impersonator scams are prevalent
This type of IRS phone scam became widespread and has been covered extensively in media reports. The Treasury Inspector General for Tax Administration (TIGTA) reported that, since 2013, more than 2.5 million people have reported impersonation scam calls to TIGTA. Of those who received phone scam calls by IRS impersonator scammers, over 15,800 became victims of the scam and paid more than $80 million IRS impersonator scammers.
According to TIGTA, the callers are aggressive, relentless and ruthless. They’re also convincing, because many have taxpayers’ personal information, including the last four digits of Social Security Numbers.
Taxpayers fall prey to this scam because they’re afraid, and they’re trying to do the right thing. According to IRS Oversight Board studies, fear of an audit is one of the most compelling drivers of taxpayer voluntary compliance. No one wants IRS scrutiny – and if taxpayers get scrutiny – they want it to go away. Combine that with the aggressive and threatening nature of the scam calls, and many people will spend thousands to remove the pain of IRS scrutiny immediately, even if it isn’t real.
Another factor contributing to the problem is that most taxpayers don’t know how the IRS enforces tax laws. Many taxpayers think the IRS enforces the law with local agents and quick, draconian methods. But that is far from the truth. The IRS conducts most audits and collection activity by mail – using notices, not in-person or other methods.
A basic understanding of how the IRS works is the best way to avoid reacting to fraudulent emails and phone calls by IRS impersonator scammers who prey on taxpayers’ lack of understanding the tax enforcement procedures. Here are six facts about the IRS that will give taxpayers confidence to just hang up if they get a scam phone call purporting to be the IRS.
Fact 1: If you’re being accused of tax fraud, you’d already know about it, because you’d already be under audit.
Tax fraud is rare, and the IRS pursues it only in egregious cases – mainly related to tax protestors and narcotics-related charges. The simple fact is, IRS data shows that most taxpayers are compliant. IRS impersonator scammers prey on taxpayers who want to do the right thing.
Fact 2: If you’re getting a call or email from the IRS, be suspicious of impersonator scams.
The IRS rarely calls on first contact and will send taxpayers a letter if there are any issues. The IRS doesn’t email enforcement communications and will never take credit card information by phone or email. IRS compliance actions do not happen suddenly. The IRS has to follow a process, with a prescribed series of mailed notices, to make taxpayers aware of an issue before a phone call would ever happen.
Note that the IRS does allow taxpayers to pay their tax bill online using a credit card or bank account.
Fact 3: The IRS will never get local law enforcement involved in a federal tax issue.
If taxpayers owe, the IRS usually collects the balance from afar. If the IRS does assign an employee to a taxpayer’s case, that employee will be a federal revenue agent or officer carrying maroon encased credentials – not local police.
Fact 4: If the caller is threatening to seize your home, business, car, or any other physical asset, the threat is bogus.
Taxpayers would be well-aware of any consequences of nonpayment months in advance – and the IRS doesn’t seize physical assets from taxpayers unless it has exhausted other options. See IRS Publication 594 for more information on the IRS collection process.
Fact 5: The IRS isn’t urgent.
That’s why there are years-long limits to how much time the IRS has to pursue an issue, called the statute of limitations. For example, if a taxpayer owes a balance, the IRS has 10 years to try to collect it. The IRS has three years to audit a tax return. Even the most urgent IRS letters allow 15 days for response. Moral of the story: The IRS isn’t going to call taxpayers demanding immediate payment.
Fact 6: You have appeal rights.
Even if a taxpayer has an IRS problem, the taxpayer would have many avenues to appeal the issue before being subject to enforcement measures. That includes opportunities to work with the IRS to address the issue or arrange a payment plan if the he or she owed money.
Bottom line: If the “IRS” calls, tell the caller to send a notice and then hang up.
No taxpayer wants to receive a threatening call from the IRS. However, if taxpayers are armed with the confidence of knowing how the IRS works, they’ll spot the impersonator scam immediately and avoid the fraud.
If taxpayers do receive a notice, head over to H&R Block’s Tax Notice and Audit Services to get help on the next steps.
For more on taxpayer scams, see the Insights article, “Stolen identity refund fraud may be down, but it’s not out”
Editor’s note: This article has been reviewed for changes following the passage of the 2017 Tax Cuts and Jobs Act. The information provided in this article was not affected by the 2017 TCJA.
Originally published on March 18, 2016.