Today, the Department of Justice charged 56 people and five call centers with conspiracy to commit identity theft, false personation of an officer of the United States, wire fraud and money laundering as part of an international tax fraud scheme. In connection with this case, 20 people were arrested in the United States and 32 individuals and five call centers in India were charged for involvement in a transnational criminal organization (source). Earlier this month, Indian police arrested 70 people for targeting Americans in a similar tax scam that may have stolen $55 million from taxpayers (source).
The sophisticated scheme uncovered today defrauded more than $300 million from 15,000 taxpayers. The scammers called random numbers in the United States and pretended to be IRS officers following up on bogus tax debts or violations. They threatened the victims with arrest, imprisonment, fines or deportation if they didn’t pay the fictitious taxes or penalties.
In one case, the scammers extorted $12,300 from an 85-year-old victim that lives in San Diego, California. The money was deposited on reloadable debit cards, which were then used to buy money orders from a store in Frisco, Texas. Another Californian man paid over $136,000 to settle a nonexistent tax bill, officials said.
Reloadable cards are popular among scammers because they allow you to access money anonymously. Once you give someone the number on the back of the card, they can have instant access to your cash.
Click here to listen to a similar IRS scam call using reloadable cards that we published last month.
In other instances, the criminals transferred money using the hawala system. This is an informal form of international cash transfers that drew the attention of investigators after the September 11, 2001, attacks. Estimates published by the U.S. Treasury put the volume of transfers made using the hawala system and $7 billion a year (source)
“Today’s sting was part of a three-year investigation that included federal, state, and local agencies”, according to an announcement made today by Inspector General John Roth of the U.S. Department of Homeland Security. If you feel you may have been a victim of this or a similar scheme, you should contact the Federal Trade Commission via this website.
The IRS, scammers, and identity theft
Unfortunately, the risk of being the victim of tax fraud is only getting worse. Since 2012, the IRS’ Identity Theft Clearinghouse has investigated over 1.72 million cases that resulted in more than $11.4 billion in fraudulent refunds. The U.S. Tax Administration estimates the IRS will pay out $21 billion in fraudulent tax refunds over the next five years (source).
Another cause for concern is the IRS decision to outsource the collection of tax debts to private collection agencies (PCAs). This new program will authorize private companies to collect taxes on behalf of the IRS (source). This will open up a whole new avenue for scammers — pretending to be legitimate private collection agencies — to defraud taxpayers.
How can you identify an IRS scammer?
Identifying an IRS scammer is not always as easy. Scammers can often:
- Tell you the last four digits of your Social Security Number
- Spoof the IRS toll-free number on caller ID so it looks like the IRS is calling your phone
- Send fake IRS emails and then follow up on the emails with a call
- Mimic the background sounds of a call center. In fact, larger, more organized operations, like the one hit by today’s Department of Justice, run their own call centers
- Threaten with jail time, hang up, and then get an associate to act pretending to be a DMV or police officer. Again, in some cases, they can spoof the caller ID so that they look like authentic calls.
So, what should you do if someone claiming to be an IRS officer, or to work for a private collection agency, calls you?
“My best recommendation would be to take the information about the debt they are purporting that you owe. They should be able to state the period, tax form, and balance as well as any accrued penalties and interest,” said Phillip Hwang, a tax attorney for Optima Tax Relief who agreed to an interview after hearing about today’s indictment.
“Additionally they should be able to project a 30-60 day payoff amount specifically. Hang up after the info and ignore any request for payments. Trust your instinct. Call the IRS directly yourself to verify at 1-800-829-1040. Clients will get multiple WRITTEN notices before any collection activities even begin,” explained Hwang.
“Any call asking for immediate payment of taxes owed can be disregarded and independently verified. Don’t panic. In any case, subsequent payments should always be done through the IRS directly: https://www.irs.gov/payments/direct-pay,” said Hwang.
If you are in doubt about the status of your tax debt or whether you qualify for a tax relief program, consider hiring a tax attorney to represent you before the IRS. It is your right to obtain representation. Plus, having a tax professional to consult with could reduce the risk of being the victim of tax fraud.
Andrew is the Content Director for SuperMoney, a Certified Financial Planner®, and a Certified Personal Finance Counselor. He loves to geek out on financial data and translate it into actionable insights everyone can understand. His work is often cited by major publications and institutions, such as Forbes, U.S. News, Fox Business, SFGate, Realtor, Deloitte, and Business Insider.