IRS Scam Swindles Taxpayers Out of $1 Million during Tax Season

Alleged targeting by the Internal Revenue Service may still rile some conservative groups, but the real scandal could lie with a sophisticated phone scam that has bilked taxpayers out of a combined $1 million.

The agency’s internal watchdog group called the nationwide scheme “the largest… of its kind that we have ever seen,” with some 20,000 taxpayers reporting being duped this year into providing credit card payments to third-party groups over the phone.

“The increasing number of people receiving these unsolicited calls from individuals who fraudulently claim to represent the IRS is alarming,” J. Russell George, Treasury inspector general for tax administration, said in a statement.

Victims reported receiving phone calls from IRS agents, many of whom threatened a slew of repercussions if victims failed to immediately pay fines for penalties.

These repercussions included mounting financial losses, jail time, deportation, and suspension or revocation of a business or driver’s license in some instances.

According to their claims, scammers went so far as to identify themselves by fake names and badge numbers and called from locations with persistent background noise that mimicked the sounds of a busy call center.

Fraudsters were said to provide sensitive personal information that included the last four digits of their targets’ Social Security numbers.

When victims tried to authenticate their claims, some scammers would hang up and call back by means of a virtual system that veiled their actual phone numbers with the digits of local police stations and DMV centers.

The Treasury inspector general warned taxpayers to beware of anyone claiming to represent the IRS, which only conducts outreach by snail mail and never asks for payment over the phone. The agency also posted a video to alert taxpayers on YouTube.

In an interview for IVN, Michael Raanan, a former IRS agent and now head of the California-based Landmark Tax Group, said the scam is “by far… one of the most pervasive scams we’ve seen this year.

“Unfortunately, these types of tax scams are quite common throughout the year, but they tend to increase substantially during tax season,” he added.

Ranaan said that three of his own clients laid claim to fraudulent phone calls from those purporting to be IRS agents. Caller ID systems recorded San Francisco and Washington, D.C., area phone numbers, but these were likely false, making it more difficult to track down perpetrators.

The tax professional says he and other practitioners from Southern California are collaborating together to find and report phone numbers used by the scammers in order to assist the IRS with its investigation.

He echoes the agency’s call to action for taxpayers.

“As always, taxpayers should not give out any personal information over the phone to anyone,” Ranaan said. “The agency’s procedure is to first contact people by mail — not by phone — about unpaid taxes. And they will never ask for payment using a pre-paid debit card or wire transfer.”

The IRS encourages taxpayers to report anyone who calls asking for a payment on behalf of the agency. Potential victims can report incidents directly to the IRS’ watchdog group by calling 800-366-4484 or file complaints online with the Federal Trade Commission.

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