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.
The scam has claimed victims in almost every state, Camus said. One unidentified victim lost more than $500,000.
“The criminals 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 would come to their homes to arrest them.”
The scam is so widespread that investigators believe there is more than one group of perpetrators, including some overseas.
Camus said even he received a call from one of the scammers at his home on a Saturday. He said he had a stern message for the caller: “Your day will come.”
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 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 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. This year, it tops the IRS list of “Dirty Dozen” tax scams.
Tax scams often increase during tax filing season, 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' offices around the country to combat tax refund fraud by people 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 and brought prosecutions against more than 1,400 people, Ciraolo told the Senate Finance Committee hearing.
“Given the sophistication of this criminal activity and the fact that a lot of it comes from overseas, this looks to me like an emerging type of 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.”