The caller claimed she was with the IRS' investigations department and she was bearing bad news: She had an arrest warrant for nonpayment of taxes.
This unnerving lie set the stage for a costly scam that ensnared the mother of an ABC News viewer in Jacksonville, N.C., who shared her story with the ABC News Fixer.
The scammer was so convincing, the woman immediately went out and bought $2,000 in prepaid debit cards to pay for back taxes and penalties the "agent" claimed she owed. But the con didn't stop there. Within three hours of handing over the money, the terrified victim got another call claiming that her payment was rejected and she'd have to pay another $3,500 to avoid immediate arrest.
She sent that money, too, before realizing later that she'd been scammed.
Sadly, that rip-off isn't unusual – in fact, it's one of the IRS' "Dirty Dozen" scams for 2014.
"There's quite a range of scams out there," said IRS spokesman Eric Smith. Consumers should remember that the IRS will never make an initial contact, out of the blue, by phone or email and ask for money or personal identifying information, Smith said: "We never do that."
Here are the top tax scams – done to taxpayers and by taxpayers – according to the IRS:
- Identity theft: It's the IRS' top scam and why you need to keep your personal information locked up. Thieves steal consumers' names, Social Security numbers and other info, then file a tax return – and obtain a refund – in the victim's name. If you believe you're at risk for identity theft due to lost or stolen personal information, you can call the IRS and ask them to secure your tax account.
- Phone scams: There's lot of variety here, with scammers impersonating IRS agents to steal your personal information or take your money. In some cases, the caller will say the consumer is entitled to a refund, but they need to provide their Social Security number or bank routing info. In others, they'll say the consumer owes back taxes and threaten them with arrest or the loss of their driver's license – or deportation, in the case of immigrant victims. "Spoofing" technology allows scammers to imitate the IRS' toll-free number on caller ID.
- Phishing: This is just like the phone scams – but online. The crooks use emails or fake IRS websites to lure their victims and get them to provide personal and financial information. Remember: the IRS never emails or texts taxpayers to ask for personal or financial information.
- False "free money": This scam plays upon the victim's greed by promising large federal refunds they aren't entitled to. Bogus tax preparers claim they can get you money based on false claims for education credits, the Earned Income Tax Credit (EITC) or the American Opportunity Tax Credit. Beware, though, because if you're involved in a false claim, you might wind up losing your real federal benefits, such as Social Security, veterans or low-income housing benefits, according to the IRS – and you could face a $5,000 penalty. On top of that, these shady "preparers" often charge a large fee.
- Preparer fraud: Most tax preparers are honest professionals. But there are scammers who are really just looking to commit identity theft. Only use preparers who sign the returns they prepare, enter their IRS Preparer Tax Identification Number (PTIN) and give you a copy of your return. You are legally responsible for what's on your return, even if someone else prepared it.
- Hiding income offshore: The IRS is cracking down on people who evade U.S. taxes by hiding their money in offshore banks, brokerage accounts or nominee entities and then use debit cards, credit cards or wire transfers to get to their funds. Ditto with people who use foreign trusts, employee-leasing schemes, private annuities or insurance plans to shirk their tax bills.
- Bogus charities: A perennial scam that crops up whenever there's a big natural disaster. Scammers impersonate charities to draw out money and private information from taxpayers who think they're making a tax-deductible contribution. Bottom line: Only deal with recognized charities.
- False information: Beware of reporting false income, expenses or exemptions on your tax return to get a bigger refund. If you're caught, you'll be on the hook for the erroneous refund, including interest and penalties, and you could be criminally prosecuted, the IRS says.
- Frivolous arguments: The IRS is not a big fan of these, so if you're tempted to say that you don't owe taxes because they're voluntary or you didn't get due process or some other goofy argument, it won't work.
- The "zero wages" lie: In this fraud, the taxpayer submits a Form 4852 (a substitute W-2) or a "corrected" Form 1099 to make their income look lower and avoid paying taxes. The IRS takes a dim view of this and could hit you with a $5,000 penalty.
- Abusive tax structure: This is a rich guy scheme in which the taxpayer uses domestic and foreign trust arrangements and the financial secrecy of foreign countries and offshore banks to avoid paying their fair share. The IRS says these schemes are characterized by the use of Limited Liability Companies (LLCs), Limited Liability Partnerships (LLPs), International Business Companies (IBCs), foreign financial accounts and offshore credit or debit cards.
- Misuse of trusts: Not all trusts are bad, but the IRS is on the hunt for unscrupulous promoters who urge people to transfer large amounts of assets – including cash, investments and ongoing businesses – into a private annuity or foreign trust just to avoid paying taxes. If this is you, be careful. Seek the advice of a trusted professional.
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