Earlier this year we wrote that the Internal Revenue Service is moving forward with its controversial “Private Debt Collection” program amid a sharp uptick in instances of fraud by scammers posing as legitimate IRS debt collectors. The new private tax collector program, authorized under a federal law enacted by Congress in December 2015, enables designated private contractors to collect, on behalf of the IRS, unpaid tax debts. Usually, these are unpaid individual tax obligations that are not currently being worked by IRS collection employees and often were assessed several years ago.
Critics of efforts by the IRS to outsource debt collections to private companies have long warned that such programs provide fraudsters with additional opportunities to perpetrate long-running scams where criminals prey on unsuspecting victims by posing as IRS representatives seeking to collect tax debts. According to the Treasury Inspector General for Tax Administration, this widespread fraud scheme has caused taxpayer losses of over $55 million. To date, more than 50 individuals have been criminally charged for their roles in a complex fraud scheme in which individuals from call centers in India impersonated IRS officials in demanding payment of back taxes. Call center operators targeted U.S. victims who were threatened with arrest, imprisonment, fines, and/or deportation if they did not pay money allegedly owed to the IRS. Victims who agreed to pay the scammers were instructed on how to provide payment, such as by purchasing stored value cards or wiring funds.
As the IRS is rolling out its private debt collection program, the tax agency is simultaneously warning taxpayers of a new phone scam that makes use of phony certified letters. In a press release entitled “IRS Warns of New Phone Scam Involving Bogus Certified Letters; Reminds People to Remain Vigilant Against Scams, Schemes this Summer,” the IRS cautioned taxpayers that fraudsters are utilizing new scams to defraud unsuspecting victims:
The Internal Revenue Service today warned people to beware of a new scam linked to the Electronic Federal Tax Payment System (EFTPS), where fraudsters call to demand an immediate tax payment through a prepaid debit card. This scam is being reported across the country, so taxpayers should be alert to the details.
In the latest twist, the scammer claims to be from the IRS and tells the victim about two certified letters purportedly sent to the taxpayer in the mail but returned as undeliverable. The scam artist then threatens arrest if a payment is not made through a prepaid debit card. The scammer also tells the victim that the card is linked to the EFTPS system when, in fact, it is entirely controlled by the scammer. The victim is also warned not to contact their tax preparer, an attorney or their local IRS office until after the tax payment is made.
“This is a new twist to an old scam,” said IRS Commissioner John Koskinen. “Just because tax season is over, scams and schemes do not take the summer off. People should stay vigilant against IRS impersonation scams. People should remember that the first contact they receive from IRS will not be through a random, threatening phone call.”
EFTPS is an automated system for paying federal taxes electronically using the Internet or by phone using the EFTPS Voice Response System. EFTPS is offered free by the U.S. Department of Treasury and does not require the purchase of a prepaid debit card. Since EFTPS is an automated system, taxpayers won’t receive a call from the IRS. In addition, taxpayers have several options for paying a real tax bill and are not required to use a specific one.
Tell Tale Signs of a Scam:
The IRS (and its authorized private collection agencies) will never:
• Call to demand immediate payment using a specific payment method such as a prepaid debit card, gift card or wire transfer. The IRS does not use these methods for tax payments. Generally, the IRS will first mail a bill to any taxpayer who owes taxes. All tax payments should only be made payable to the U.S. Treasury and checks should never be made payable to third parties.
• Threaten to immediately bring in local police or other law-enforcement groups to have the taxpayer arrested for not paying.
• Demand that taxes be paid without giving the taxpayer the opportunity to question or appeal the amount owed.
• Ask for credit or debit card numbers over the phone.
For anyone who doesn’t owe taxes and has no reason to think they do:
• Do not give out any information. Hang up immediately.
• Contact the Treasury Inspector General for Tax Administration to report the call. Use their IRS Impersonation Scam Reporting web page. Alternatively, call 800-366-4484.
• Report it to the Federal Trade Commission. Use the FTC Complaint Assistant on FTC.gov. Please add “IRS Telephone Scam” in the notes.
For anyone who owes tax or thinks they do:
• Call the number on the billing notice, or
• Call the IRS at 800-829-1040. IRS workers can help.
The IRS does not use email, text messages or social media to discuss personal tax issues, such as those involving bills or refunds. For more information, visit the “Tax Scams and Consumer Alerts” page on IRS.gov. Additional information about tax scams is available on IRS social media sites, including YouTube videos.