Tax Debt Scams: How to Avoid Becoming a Victim When You Owe the IRS

Last updated: Apr 01, 2019

Tax Debt Scams: How to Avoid Becoming a Victim

Tax debt relief scams prey on people who owe money to the IRS. Find out how to avoid becoming a victim here!

Are you overwhelmed by your tax debt? Discovering you owe thousands of dollars is terrible – especially if you don’t have the money to pay.

Many companies prey on that vulnerability by offering tax debt relief they can’t deliver. Sometimes they charge thousands in non-refundable fees upfront and make offers that are too good to be true.

Even worse, scam artists routinely target people who owe the IRS – or who can be convinced they do. These criminals can be convincing and it’s easy to get sucked in.

This article will show you how to sniff out a scam before you lose your money.

“I’m Getting Calls Saying I Owe Tax Debt”

Make sure it’s the IRS trying to get a hold of you. Sometimes, scam artists pose as IRS agents calling to collect money for back tax debts.

Know what to look for and how to tell the difference. If whoever is calling you doesn’t follow IRS protocols, it’s a scam. Here’s what to look for:

  • If it’s the IRS, you will receive multiple mailed notices that you owe money. The IRS will never call and demand immediate payment.
  • The IRS will never ask you to pay in the form of a prepaid card or gift certificate. They will mail you a bill and follow up with several notices.
  • You will always have the option to appeal your debt. The IRS will never ask you to pay without informing you of your options.
  • The IRS will never threaten involving the local police.

Tax scams are often well organized and look legitimate but if you know how the IRS operates, you won’t be sucked in.

Identity Theft Is the Number One Tax Scam

All tax preparers have a Preparer Tax Identification Number (PTIN). Anyone preparing your taxes has to sign with their name and include this PTIN.

Illegitimate preparers will not sign any personal identifiers. They can then submit these tax forms and collect any money returned. They will often guarantee a large refund and tell you their pay will come out of it. These “ghost tax return preparers” are committing identity theft.

Know the warning signs that your identity has been stolen:

  • There should only be one tax return filed using your social security number (SSN). More than one return means someone else has used your information to get access to any money you are owed on your tax return.
  • Any time your return includes unfamiliar wages and employers that you never worked for, it’s a red flag.

“What Do I Do If Someone Else Is Using My SSN?”

Having your identity stolen can make you feel helpless, but it’s important to act right away. If you catch the irregularities in your tax return early, you can avoid the worst consequences. Scam victims need to follow these steps immediately:

  • File a complaint with the FTC
  • Contact any of the three major credit bureaus and set a fraud alert on your credit cards
  • Contact your bank(s) and let them know you have had your identity stolen
  • Close any accounts opened and review all purchases made with your credit cards

If you receive any notices from the IRS during this time, call the number on the form right away. You’ll also need to fill out form 14039 indicating you’ve had your identity stolen. The 14039 also tells the IRS not to move your debt to a collection agency.

Why Did This Happen?

The internet provides the most opportunity for identity theft. Taking simple precautions can save you the grief of having your identity stolen. Victims of scams are often using unsecured networks to transfer their private information.

Effective ways to prevent identity theft include:

  • Never use a computer without a firewall and anti-virus software installed.
  • Stay informed of the latest phishing email scams. These emails will look like real messages from the IRS. They can even have “spoofed” email addresses ending in .gov. The IRS website lists the most common phishing emails sent.
  • Never download attachments from an email unless you are sure you know who sent it.
  • Don’t carry your social security card with you and make sure all your tax forms are in a locked box.

Remember, the IRS will always send a mail notice first. They will never make their first contact through phone or text. Only after several mailed notices have gone unanswered will they call. Even then, they will not ask for immediate payment and will tell you what to do to appeal your debt.

“What If They Come to My Door?”

Sometimes these scammers will show up in person. It’s intimidating when someone claiming to be with the IRS demands money at your doorstep.

Like the police, all IRS employees have official documentation. They will also have a number you can call to verify their status with the agency. You have the right to ask for both of these anytime someone comes to your door claiming you owe taxes. If they give you a number to call, look it up online to be sure that number is actually an IRS phone number and not a direct line to another person on the scam team.

The IRS does use the services of private debt collectors. This can give scammers the opportunity to fake being a contracted collection agency.

The IRS maintains a list of all private collection agencies used. Make sure your collector is on the list.

There are situations where the IRS won’t use private agencies for overdue payments. Some of these situations include:

  • Deceased taxpayers
  • Minors
  • Anyone on active duty
  • Victims of ID theft
  • Anyone under criminal investigation
  • Injured spouses

What Is an Injured/Innocent Spouse?

That last term is often confused with “innocent spouse“. Both deal with the problem of marriage and tax debt.

In a case involving injured spouse relief, if your spouse ran up a tax bill without you knowing, you may not be liable. Innocent spouse relief applies to separated and divorced couples. Both require that the party looking for debt relief had no knowledge or part in incurring the debt.

Having tax debt is stressful enough! You shouldn’t also have to face fraud.

Take the necessary security precautions when online and in person. Check the official IRS website when you are unsure of what to do next. When you decide it’s time to contact a professional about your tax debt, ask us for a free consultation.