Tax scams increase every year when the April income tax return deadline approaches. Add that to the fact that scams historically increase during crisis times, such as during a pandemic, and you have even more reason to be cautious about tax scams this year. There are a number of ways that innocent people, especially seniors and those who carry a large amount of financial debt, become victims of tax fraud.
If you get a call from a debt collector, claiming to be collecting back taxes for the Internal Revenue Service (IRS) here are a few things you should know.
Always seek the advice of a CPA or tax specialist to help determine what is is really going on.
The following information will help you be prepared if a tax scam does come your way.
1.The IRS only uses select private debt collection agencies when the IRS is no longer actively working the case. You will know when the IRS is no longer “actively working” your case because the IRS will send you and your representative (usually your attorney) a written notice that your account is being assigned to a private collection agency.1
Then, the private collection agency to which the account was assigned will send you and your representative a letter to confirm that the IRS has transferred the account to the debt collection agency. The private collection agency, and all debt collectors, must follow the guidelines of the Fair Debt Collection Practices Act.2
The IRS also provides a Taxpayer Authentication Number to both confirm your identity and to verify that the caller from the debt collection agency is legitimate. This number will be provided to you on the letter that the IRS sends notifying you that your account has been turned over to a private debt collection agency. It will also be on the letter from the private debt collection agency when they notify you that your IRS collection account has been turned over to them.
2. The IRS does hire several private debt collection agencies to work on accounts where taxpayers owe money. Contact information for each of these legitimate firms can be found on the IRS website.3 If you receive a call from a debt collection agency about collecting amounts owed the IRS, and you have received a letter from the IRS notifying you that your account has been assigned to a debt collection agency, ask the debt collector to give you their name, the firm they work for, and the Taxpayer Authentication Number.4
If they are not able to provide that Taxpayer Authentication Number, do not provide the caller with any personal information. Instead, you should directly call the private debt collection agency listed on the letter you received. Never use a phone number provided by the caller.
3. If you are contacted via email about a tax bill, refund or Economic Impact Payment, that email is not from the IRS. The IRS will never initiate contact with a taxpayer via email about any of these subjects.5 Criminals use emails to illegally obtain personal information that can be used to commit crimes like identity theft.
4. If you receive a call or email where the caller makes threats about what will happen if you don’t immediately send in a payment, that contact is not from the IRS or any of its designated debt collection agencies. The IRS (and its authorized private debt collection agencies) will never threaten a taxpayer or surprise him or her with a demand for immediate payment.6
It is common for criminals to threaten victims with arrest, license revocation and even deportation to create a sense of urgency and to instill fear in the victim.
5. The IRS will never ask you for financial information over the phone.7
6. The IRS does not accept payments by pre-paid debit cards. Their representatives also cannot take credit card payments over the phone. Electronic payments are only processed through the IRS website.8
If you pay your taxes by check, the check should always be made payable to “U.S. Treasury” and sent directly to the IRS, not the private collection agency.
Call an Experienced CPA and Tax Specialist in Michigan
Always contact the IRS or a tax specialist if you have any doubts that the person contacting you might not be from the IRS. The worst thing that you can do in this situation is to act in haste or fear.
If you have questions about your individual or business taxes, the tax specialists at Tax Avenger in Canton can help. With more than 20 years of experience in tax preparation, tax planning and business accounting services, you will get the service you need and deserve. Call today and see why we are among the best accounting firms in Canton and beyond! Free Consultations
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1 Consumer Alert: Debt Collectors & the IRS
Link: https://www.michigan.gov/ag/0,4534,7-359-81903_20942-409674–,00.html
2 Fair Debt Collection Practices Act
Link: https://www.ftc.gov/legal-library/browse/rules/fair-debt-collection-practices-act-text
3,4 Private Debt Collection
Link: https://www.irs.gov/businesses/small-businesses-self-employed/private-debt-collection
5,6,7 IRS Unveils “Dirty Dozen” List of Tax Scams for 2020
Link: https://www.irs.gov/newsroom/irs-unveils-dirty-dozen-list-of-tax-scams-for-2020-americans-urged-to-be-vigilant-to-these-threats-during-the-pandemic-and-its-aftermath
8 Pay Online
Link: https://www.irs.gov/payments