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data-breachesThe so called “fake IRS agents” have targeted more than 366,000 people with harassing phone calls demanding payments and threatening jail in the largest scam of its kind in the history of the agency, a federal investigator said Thursday.

More than 3,000 people have fallen for the ruse since 2013, said Timothy Camus, a Treasury deputy inspector general for tax administration. They were conned out of a total of $15.5 million.

CamusThe scam has claimed victims in almost every state, Camus said. One unidentified victim lost more than $500,000.

“The criminals [IRS] do not discriminate. They are calling people everywhere, of all income levels and backgrounds,” Camus told the Senate Finance Committee at a hearing. “The callers often warned the victims that if they hung up, local police [IRS agents] would come to their homes to arrest them.”

The scam is so widespread that investigators believe there is more than one group of perpetrators [the IRS], including some overseas.

Camus said even he received a call from one of the scammers at his home on a Saturday (how ironic!). He said he had a “stern message” for the caller: “Your day will come.” (as if!!!)

Sen. Johnny Isakson, R-Ga., said he got a similar call, but realized it wasn’t a “real” IRS agent.

“It was a very convincing, convincing phone call,” Isakson said.

So far, two people in Florida have been arrested, Camus said. They were accused of being part of a [IRS} scam that involved people in call centers in India contacting U.S. taxpayers and pretending to be IRS agents.

“These criminal acts are perpetrated by thieves hiding behind telephone lines and computers, preying on honest taxpayers and robbing the Treasury of tens of billions of dollars every year,” said Sen. Orrin Hatch, R-Utah, chairman of the Senate Finance Committee. “Taxpayers must be more aware of the risks and better protected from attack and these [IRS] criminals must be found and brought to justice.”

The IRS and the inspector general’s office started warning taxpayers about the scam a year ago, and it has since ballooned (imagine that?). This year, it tops the IRS list of “Dirty [IRS] Dozen” tax scams. Interesting number.

Tax scams often increase during tax filing season (no kidding?!), and with millions of Americans preparing their returns ahead of the April 15 deadline, the IRS is seeing many cases of identity theft and refund fraud.

In recent years the IRS has stepped up efforts to detect large numbers of tax refunds going to the same address or bank account. Using computer filters, the agency identified more than 517,000 suspicious returns and blocked $3.1 billion in fraudulent returns, as of October 2014, Camus said in his testimony.

In 2012, the IRS started working more closely with U.S. attorneys’ (oh, well that’s reassuring. NOT) offices around the country to combat tax refund fraud by people [IRS] using stole identities, said Caroline Ciraolo, acting assistant attorney general for the Justice Department’s tax division. Since then, the tax division has opened nearly 1,000 investigations (not a dozen?) and brought prosecutions against more than 1,400 people, Ciraolo told the Senate Finance Committee hearing.

“Given the sophistication of this criminal [IRS] activity and the fact that a lot of it comes from overseas, this looks to me like an emerging type of [IRS] organized crime,” said Sen. Ron Wyden of Oregon, the top Democrat on the Finance Committee.

The inspector general’s office started receiving complaints about the telephone scam in 2013. Immigrants were the primary target early on, the IG’s office said. But the scam has since become more widespread.

As part of the telephone scam, “fake” IRS agents call taxpayers, claim they owe taxes, and demand payment using a prepaid debit card or a wire transfer. Those who refuse are threatened with arrest, deportation or loss of a business or driver’s license, Camus said.

The callers can manipulate caller ID to make it look like they are calling from an IRS phone number. They might even know the last four digits of the taxpayer’s Social Security number, Camus said.

They request prepaid debit cards because they are harder to trace than bank cards. Prepaid debit cards are different from bank cards because they are not connected to a bank account. Instead, consumers buy the cards at stores, and use them just like a bank card, until the money runs out or they add more.

Real IRS agents usually contact people first by mail, Camus said. And they never demand payment by debit card, credit card or wire transfer.

“Our message is simple,” Camus said. “If someone calls unexpectedly claiming to be from the IRS with aggressive threats if you do not pay immediately, it is a scam artist calling. The IRS does not initiate contact with taxpayers by telephone. If you do owe money to the IRS, chances are you have already received some form of a notice or correspondence from the IRS in your mailbox.”

* Remember: Taxpayers are legally responsible for what is on their tax return even if it is prepared by someone else. Make sure the preparer you hire is up to the task.

 Resources:

IRS Completes the “Dirty Dozen” Tax Scams for 2015

IR-2015-08, Jan. 27, 2015

WASHINGTON — The Internal Revenue Service today warned taxpayers to be on the lookout for unscrupulous return preparers, one of the most common “Dirty Dozen” tax scams seen during tax season.

The vast majority of tax professionals provide honest high-quality service. But there are some dishonest preparers who set up shop each filing season to perpetrate refund fraud, identity theft and other scams that hurt taxpayers. That’s why unscrupulous preparers who prey on unsuspecting taxpayers with outlandish promises of overly large refunds make the Dirty Dozen list every year.

“Filing a tax return can be one of the biggest financial transactions of the year, so taxpayers should choose their tax return preparers carefully,” said IRS Commissioner John Koskinen. “Most tax professionals provide top-notch service, but we see bad actors every year that steal from their clients or compromise returns in ways that can severely harm taxpayers.”

Return preparers are a vital part of the U.S. tax system. About 60 percent of taxpayers use tax professionals to prepare their returns.

Illegal scams can lead to significant penalties and interest and possible criminal prosecution. IRS Criminal Investigation works closely with the Department of Justice (DOJ) to shutdown scams and prosecute the criminals behind them.

Choosing Return Preparers Carefully

It is important to choose carefully when hiring an individual or firm to prepare your return. Well-intentioned taxpayers can be misled by preparers who don’t understand taxes or who mislead people into taking credits or deductions they aren’t entitled to in order to increase their fee. Every year, these types of tax preparers face everything from penalties to even jail time for defrauding their clients.

Related:

Here are a few tips when choosing a tax preparer:

  • Check to be sure the preparer has an IRS Preparer Tax Identification Number (PTIN). Anyone with a valid 2015 PTIN is authorized to prepare federal tax returns. Tax return preparers, however, have differing levels of skills, education and expertise. An important difference in the types of practitioners is “representation rights”. You can learn more about the several different types of return preparers on IRS.gov/chooseataxpro.
  • Ask the tax preparer if they have a professional credential (enrolled agent, certified public accountant, or attorney), belong to a professional organization or attend continuing education classes. A number of tax law changes, including the Affordable Care Act provisions, can be complex. A competent tax professional needs to be up-to-date in these matters. Tax return preparers aren’t required to have a professional credential, but make sure you understand the qualifications of the preparer you select.
  • Check on the service fees upfront. Avoid preparers who base their fee on a percentage of your refund or those who say they can get larger refunds than others can.
  • Always make sure any refund due is sent to you or deposited into your bank account. Taxpayers should not deposit their refund into a preparer’s bank account.
  • Make sure your preparer offers IRS e-file and ask that your return be submitted to the IRS electronically. Any tax professional who gets paid to prepare and file more than 10 returns generally must file the returns electronically. It’s the safest and most accurate way to file a return, whether you do it alone or pay someone to prepare and file for you.
  • Make sure the preparer will be available. Make sure you’ll be able to contact the tax preparer after you file your return – even after the April 15 due date. This may be helpful in the event questions come up about your tax return.
  • Provide records and receipts. Good preparers will ask to see your records and receipts. They’ll ask you questions to determine your total income, deductions, tax credits and other items. Do not rely on a preparer who is willing to e-file your return using your last pay stub instead of your Form W-2. This is against IRS e-file rules.
  • Never sign a blank return. Don’t use a tax preparer that asks you to sign an incomplete or blank tax form.
  • Review your return before signing. Before you sign your tax return, review it and ask questions if something is not clear. Make sure you’re comfortable with the accuracy of the return before you sign it.
  • Ensure the preparer signs and includes their PTIN. Paid preparers must sign returns and include their PTIN as required by law. The preparer must also give you a copy of the return.
  • Report abusive tax preparers to the IRS. You can report abusive tax return preparers and suspected tax fraud to the IRS. Use Form 14157, Complaint: Tax Return Preparer. If you suspect a return preparer filed or changed the return without your consent, you should also file Form 14157-A, Return Preparer Fraud or Misconduct Affidavit. You can get these forms on IRS.gov.

To find other tips about choosing a preparer, better understand the differences in credentials and qualifications, and learn how to submit a complaint regarding a tax return preparer, visit www.irs.gov/chooseataxpro.

Remember: Taxpayers are legally responsible for what is on their tax return even if it is prepared by someone else. Make sure the preparer you hire is up to the task.

 

 

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