The Latest Tax Scam: What You Need to Know to Protect Yourself

tax scam

While tax season ended months ago, tax scammers are still out in full force. And if you’re dreading hearing from the Internal Revenue Service (IRS) because you couldn’t pay your taxes this year, the latest tax scam preys on your worst fears.

Imagine receiving a phone call from a terse IRS agent. She claims you didn’t pay your tax bill on time, and the IRS sent you two certified mail notifications stating you’re past due. She says that you need to pay right away or the police will arrest you.

This is just the latest scam taking advantage of consumers and, unfortunately, many people fall for it. Find out how scammers are taking advantage of consumers and what you can do to protect yourself.

The latest IRS tax scam

This tax scam uses the latest tax developments to its advantage. In April, the IRS announced that it would use private tax collectors and would send letters to a small group of taxpayers who were past due. That change makes this new scam sound more legitimate.

According to MSN Money, this certified mail scam is becoming increasingly common. After saying the mail notifications came back as undeliverable, the caller tells the victim that their account is overdue and must be paid immediately to avoid jail time.

While this is similar to other tax scams, there is a new twist: The caller instructs the taxpayer to put the money owed on a pre-paid debit card, which they claim links to the government’s Electronic Federal Tax Payment System (EFTPS).

While the EFTPS is a real tax payment system, payments are never made by sending debit cards. Instead, the debit card goes to the caller, who can then use your funds freely.

The con artist on the phone can be persistent and convincing. They may give you a false agent number, or even threaten you if you ask too many questions. They may tell you that your situation will only become worse if you contact a tax preparer or a family member for help.

What you need to know about tax fraud calls

The IRS receives up to 10,000 calls a week from individuals who have received calls from IRS agent impersonators. The people most at risk are college students, senior citizens, and those who are not fluent in English.

It’s important to know that the scammers are sophisticated. They have found ways to have their phone number show as coming from the Washington, D.C., area on a victim’s caller ID, even though they usually live overseas.

Even worse, they often have your personal information, including the last four digits of your Social Security Number, which can make them sound even more convincing.

How to protect yourself

While these tax fraud calls can be frightening, there are measures you can take to protect yourself.

The Consumer Financial Protection Bureau (CFPB) says these are the key warning signs that a debt collector is a fake:

  • The caller threatens you with arrest. Legitimate debt collectors, including those acting on behalf of the IRS, will not claim the police are on their way.
  • They refuse to give you more information. Real debt collectors will supply you with their full name, company name, and professional license number.
  • They will not give you a mailing address or phone number. IRS tax collectors are based in the United States and will share their address and phone number if asked. Fraudulent callers will refuse to give you their address or phone number.
  • They ask for personal financial information. If the caller asks you for personal information, such as your full Social Security Number or bank account number, hang up.

If you are suspicious about a caller, refuse to continue the conversation. You can also follow the CFPB’s instructions on dealing with debt collectors. They will investigate your case and will try to take legal action against the offenders.

However, if you think you may owe the IRS money, call your local IRS office or your tax preparer directly for help.

Con artists invent new tax scams every day. By being aware of their practices and warning signs, you can protect yourself and prevent losing money.

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Published in Budgeting, News, Taxes