Criminals who use mail, telephone, or email to try to collect bogus tax money have scammed thousands of people out of millions of dollars, as well as sensitive personal information. Here are some tips to help you avoid becoming a victim.
About a year ago, Alex Reffett got a call from someone saying he owed thousands of dollars in taxes. The person gave him a bank account where he could wire the money, and Reffett said would go to the bank to complete the transfer. But when he began showing some skepticism, the caller threatened to send the police.
As a financial professional, Reffett knew the call was an IRS phone scam, and he decided to play along to see how far it would go. He might learn useful information for his clients. But for regular folks, he recommended hanging up on suspicious callers immediately.
“It can be pretty hostile and confusing if you’re not aware that it’s a scam,” said Reffett, principal and cofounder of East Paces Group and a registered investment advisor. “I have empathy for the people affected—scammers can be aggressive.”
Criminals who use mail, telephone, or email to collect bogus tax money have scammed thousands of people out of millions of dollars, as well as sensitive personal information, according to the IRS. Here are a few tips from Reffett and other financial professionals to help you avoid becoming the victim of a fake IRS scam.
Alano Massi, managing director of financial planning company Palm Capital Management, suggested the best way to avoid scams is to know what the IRS will not do.
According to the IRS website, government tax collectors won’t:
All this isn’t to say that the IRS will never contact you by phone or mail. But the way things are handled can tip you off as to whether the contact is legit.
For people who owe taxes, the IRS will generally mail a bill first. And the IRS instructs taxpayers to make payments to the United States Treasury. If you do get a letter purporting to be from the IRS, confirm its authenticity by calling the local IRS office, said John Iammarino, principal and founder of retirement planning company Securus Financial.
Even in special circumstances, such as with overdue tax bills, delinquent tax returns, or employment tax payments, the IRS will generally send notices in the mail before calling or coming to a home or business, according to the government.
Still, it’s possible the IRS could call or show up unannounced to collect a tax debt. If someone visits you saying they’re from the IRS, know that legitimate representatives will provide two forms of credentials. If you want to check their IDs, the representatives will provide you with a dedicated IRS line to call to verify their information.
There are circumstances when the IRS might assign a case to a private collections agency, but only after providing the taxpayer with written notice. Like the IRS, private debt collectors won’t ask for payment on prepaid debit cards or gift cards. Any checks would be made out to the Treasury, not the collections agency.
If you’re getting audited, the IRS might call you to set up an appointment or discuss your case, but they won’t do that before attempting to notify you by mail.
If you’re under criminal investigation, the IRS could show up at your door without letting you know. But these criminal investigators are federal law enforcement agents—they won’t ask you for any sort of payment.
Kelly Bavaresco, supervision principal and senior investor oversight at TD Ameritrade, offered up a few ideas on how to stay safe:
Scammers have become sophisticated. They can alter caller ID numbers to make it look like the IRS is calling. They may even use actual IRS employee titles and bogus badge numbers to make it look like they’re legitimate.
“Scammers also change tactics, often using aggressive bully tactics over the phone to scare an individual not just into paying, but into paying immediately,” Massi said.
One tactic scammers use involves filtering to improve the chance of snaring a victim. They’ll use robocalls that start with an “urgent” message about taxes you owe immediately. The message concludes by asking you to press a number. Doing so connects you to an in-person, live scammer. “Do not press any number when you receive these types of calls,” Massi cautioned.
Scammers aren’t always after your cash. Reffett has seen criminals impersonating the IRS to try to get people’s Social Security Numbers, saying they’re necessary in order to process a refund.
“It’s important to stay vigilant and skeptical,” Massi said. “If you receive a call from a number you do not know, let it go to voicemail.”
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Matt Whittaker is not a representative of TD Ameritrade, Inc. The material, views, and opinions expressed in this article are solely those of the author and may not be reflective of those held by TD Ameritrade, Inc.
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