Inside Track: Tax Scams: Criminals Have Your Client’s Numbers:

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    Tax Scams: Criminals Have Your Client’s Numbers

    Scammers are posing as IRS agents and leveraging the fears and misunderstandings of people nationwide to extract payments in the name of tax debt. In this article, tax attorney Rob Teuber explains that scam and urges attorneys to inform clients.

    Robert B. Teuber

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    scam phone callJune 17, 2015 – The Internal Revenue Service (IRS) is regularly in the news these days, whether related to hackers breaching IRS security protocols, possible indictments related to the FIFA corruption scandal, or its own exempt organization scandal.

    With all this coverage, the IRS is viewed as one of the most intimidating government agencies that can suddenly enter anyone’s life without the perception of any wrongdoing. As a result, there exists an incredible amount of mystery about the agency’s power. It is this mystery that con artists exploited in 2013 to cheat nearly 3,000 taxpaying victims out of more than $14 million through a continuing phone scam.

    The phone scam is one of today’s most prevalent tax scams and can fool even sophisticated clients. Yet, despite the IRS’s efforts to inform the public about known scams (principally through its website and social media presence), the conartists continue to find success in their fraud. For this reason, it is up to us, as lawyers, to advise our clients on how to avoid falling victim to the scams.

    It Can Happen to Anyone

    A few weeks back, a former client called me in a panic. Two years ago, we had worked through an IRS tax audit that resulted in some additional tax due.

    Rob TeuberRob Teuber (Marquette 2000) is a tax attorney with Weiss Berzowski Brady LLP, Milwaukee. He represents clients in Federal and State tax audits, appeals, and collections. He is the author of the Tax Law Forum. Reach him by email or by phone at (414) 276-5800.

    To resolve that debt, we worked out a reasonable payment plan to eliminate the balance over the next few years. The client had been honoring all obligations of that payment plan: paying on time, filing on time, and not incurring any new tax debts. The payment plan remained in effect, and no default had occurred.

    The client’s fear, however, was triggered by a call from a “U.S. Treasury agent.” That “agent” was instructing my client to pay a balance due (which was nowhere near the actual remaining liability) by cashier’s check before the end of the day. A failure to do so would mean that local law enforcement would come to the client’s home to arrest him.

    My client is sophisticated and has run his own business for 20 years. While he had never dealt with the IRS before the audit, he learned a lot as we navigated the exam.

    Throughout the audit and beyond, we had often spoken about the reach and limits of the IRS’s power. Yet, when the purported U.S. Treasury agent called and threatened him with arrest, his blood ran cold.

    Important note: The IRS does not call and threaten arrest.The IRS will never call and threaten arrest for the nonpayment of taxes. The IRS doesn’t have the power or authority to arrest someone for being unable to pay. Sure, if a client commits tax fraud they can go to jail. But, being unable to pay is not fraud.

    The “Dirty Dozen” Tax Scams

    What my client was dealing with was a pervasive telephone scam that remains on the IRS “Dirty Dozen” list of tax scams. The scam involves someone pretending to be from the IRS calling and informing the victim of a fictitious tax liability. The caller will likely have certain personal information that lends credibility to any threats they make.

    The phone scam is one of today’s most prevalent tax scams and can fool even sophisticated clients.

    Often the caller advises that the IRS will be coming to arrest them and that it is too late for payment. Upon protest, the caller offers a way to avoid incarceration if payment is made in a specific manner by day’s end. An unfortunately large number of taxpayers fall for the ruse and make payment.

    Why the Scams are Successful

    A big part of the problem is the lack of knowledge surrounding the IRS’s power and the procedures that must be followed before the IRS can do something.

    It’s true that the IRS can file liens, garnish wages, levy bank accounts and even seize property when trying to collect a tax debt. However, there are a number of notices that have to be issued and appeal opportunities that exist before the IRS is able to do so.

    A client will receive several letters (some by certified mail) before the IRS can levy or seize anything. It is highly unlikely that a client could get this far down the procedural road without having some idea that a liability exists.

    But people do not know about these procedures. As a result, an effective con can be perpetrated by leveraging the fear of the unknown. Even those who do not owe tax may be convinced that proper procedure is to demand immediate payment without procedural recourse. The scam gets easier if the client does have a known tax debt that has yet to be addressed.

    Inadequate IRS funding is also a problem. The IRS budget has been cut several times in recent years. IRS responsibilities have also expanded and significant resources are being allocated to fight the increasing identity theft epidemic. As a result, the IRS can only do so much to pursue any reported fraudsters.

    The IRS Will Never …

    As attorneys, we hold a special position of trust in the minds of our clients. Presumably this is why they have chosen us to represent them in some of the most significant parts of their lives. As a result, we should also take the opportunity to alert our clients to scams that could affect any one of them.

    It is important for our clients to know that if they receive a call from someone claiming to be from the IRS, a real IRS agent will never:

    • Call to demand immediate payment, nor will they call about a debt without first having mailed a bill or notice;

    • Demand that taxes are paid without first allowing the chance to question or appeal the asserted debt;

    • Require payment by a specific method (such as a prepaid debit card);

    • Ask for credit or debit card numbers over the phone;

    • Threaten arrest by local police or other law-enforcement groups for nonpayment.

    Alert Your Clients

    After my client received the call, I realized that even those with whom I have worked in the past may fall victim to the phone scam. Sure, they know that they can call me, but some may not. For this reason, I am sending each of them a letter to caution them about the scam. You can find a form of that letter in the accompanying sidebar.

    Readers are welcome to copy and paste the letter and send it to your clients. Get the word out and protect them.

    If you do hear from your clients that they have received such a call (or fallen victim to the scam) you can refer to the IRS webpage for how to react. The webpage contains instructions on what steps the client may take, who at the IRS they can contact, and how to file an FTC Complaint through the FTC Complaint Assistant.

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