The latest phone scam goes something like this: Someone calls and claims to be from the IRS. They say that you owe taxes and you need to make a payment right away. Otherwise, the scammer says, you may be deported, lose your business license, or even be arrested. This is in addition to the ongoing problems with tax fraud identity theft.
How To Tell If It’s the IRS Phone Scam
There are a couple of tip offs that can help you detect whether it really is the IRS on the phone. First, off, the IRS does most of this stuff by mail. Mail gives a verifiable paper trail for future legal proceedings if necessary. Also, having a computer spit out 10,000 letters is way faster, cheaper, and more efficient than calling 10,000 people. If you haven’t gotten a single letter from the IRS before you get a phone call, be very suspicious.
Sometimes, the scammer gets lucky and maybe you have gotten some letters from the IRS. Maybe you didn’t understand them completely. Now, it’s time to understand how the IRS threatens people.
The IRS cannot do ANYTHING at all without telling you IN WRITING that they are going to do it first. You will get a letter telling you what action, if any, the IRS is going to take before they take it. The letter will also tell you what action you can take to appeal, stop, or rectify any situation. If the person on the phone is talking about taking away your business license but this is the first you’ve heard of it, that isn’t how it works.
There are no “last chances” with the IRS. In order to pressure people into paying, the phone scammer makes it sound like this is your absolutely last chance to avoid nasty trouble. That is never really the case, but in order for the scam to work, they need you to pay right away before you talk to someone and realize it’s a con. The IRS is pretty much always willing to accept your payment. If they go to court and get an order to seize property and then you hand over a certified check, they will be good with that. The IRS doesn’t want you in prison, and they don’t want to ruin your business, they want your money.
Finally, keep in mind what the powers of the IRS are. We have a big mythology built up around the IRS, but it isn’t an all powerful arm of government. There are certain things the IRS can do easily, and it will typically start with those actions. For example, the IRS can intercept both your federal tax refund, and any state tax refund without any sort of court order or other action. You’ll get a letter telling you that they are going to do it, unless you pay by a certain date.
On the other hand, the IRS cannot have you arrested without a court order. And, the IRS cannot have you deported at all. They also cannot take revoke you business license (which was probably issued by your state and not the federal government anyway.)
Always be on the lookout for scam payment types.
Scammers like payments that are quick to withdraw and untraceable. That way, when people come looking for them, there is no one there. Scammers love wire transfers and prepaid credit cards. These funds can be picked up right away, sometimes without any ID. If the caller insists that you can only pay in certain ways, it is almost certainly a scam. The IRS likes your money however you want to pay it, check, cash (at an office, not through the mail) and sometimes credit card.
Remember, your best defense from a phone scam is to tell the caller you are going to hang up and call back to verify that the call is legitimate. In the case of the IRS, find a 1-800 number online or in a tax book and call them. Your Social Security Number, ITIN, or EIN number should be all they need to find your record and then start transferring you around to the right person.
If you are contacted by a scammer, document as much of the call as you can and if possible get the caller ID number. Then report it to your state attorney general or the IRS fraud department.