A Troubling New Tactic in the IRS Impersonation Scam

For most Americans, tax season ends on April 15.  For the con artists operating the pernicious IRS impersonation scam, cheating honest taxpayers is a year-round job.

In this scam, fraudsters telephone victims, impersonate an IRS agent, and demand payment for allegedly unpaid taxes. The callers frequently threaten victims with arrest, foreclosure, or other adverse legal action.  Scammers often instruct their victims to pay using a money wire or prepaid debit card. 

In the past several weeks, however, the U.S. Treasury Department has learned that IRS impersonation scammers increasingly are demanding payment in the form of iTunes or other gift cards.  Once these con artists have the numbers on the back of the activated gift cards, they can either use the cards for purchases or resell the cards to third parties online.  A resident of Kennebec County recently lost $1,000 in iTunes gift cards through a similar scam.

As Chairman of the Senate Aging Committee, I am focused on stopping fraud and financial exploitation against our seniors, who are the frequent targets of scammers.  This problem is immense.  America’s seniors lose a staggering $2.9 billion each year to an ever-growing array of financial exploitation schemes and scams.  With the wave of Baby Boomers now a “Silver Tsunami” of retirees, it is no mystery why financial fraud targeting seniors is considered “The Crime of the 21st Century.”

This most recent variation of the IRS impersonation scam demonstrates that these fraudsters are relentless in their desire to rob our nation’s seniors of their hard-earned savings. Thousands of seniors in Maine and across the country have contacted our Committee’s Fraud Hotline (toll-free at 1-855-303-9470) to report that they have received calls and emails that are scams.

In the Kennebec County case, a con artist impersonating a deputy sheriff called the victim and told her she would be arrested if she did not immediately pay $1,000 in iTunes gift cards for taxes she allegedly owed.  The victim was told to buy the cards at a local store and to call back with the gift card numbers.  The victim did as she was told, but when the impersonator demanded even more money, she realized she had been scammed and called the police.  By that time, it was too late. An investigator learned that the money had been transferred from the gift cards 25 minutes after they were activated.

It is important for taxpayers of all ages to know that the IRS and Maine Revenue Services do not conduct business in this way.  If either agency believes back taxes are owned, the taxpayer is notified in writing and there is a process for clarification, appeals, and for negotiating payment plans if taxes truly are owed.  Threats of immediate arrest and demands for payment over the phone – whether by credit, debit, or gift card – are tell-tale signs of a scam.

Last year, the Aging Committee’s Fraud Hotline, which is staffed by experienced fraud investigators, received calls from more than 1,100 seniors across the country.  The number-one complaint in 2015 was the IRS imposter scam.  It is estimated that this scam has cost innocent victims more than $41 million, averaging more than $5,700 per victim.

The Aging Committee’s effort to fight senior fraud is bearing real results.  In May, the Treasury Inspector General for Tax Administration arrested five individuals in connection with the IRS imposter scam.  Federal authorities believe these suspects scammed almost $2 million from more than 1,500 victims.

The arrests stemmed from a call to the Committee’s Fraud Hotline.  The caller reported that her husband had recently been contacted by an individual claiming to be from the IRS and demanding immediate payment of alleged back taxes.  The Fraud Hotline investigator who received the report was able to trace the $2,000 the victim wired via MoneyGram to Minnesota and reported this information to the Treasury Inspector General.  The Inspector General’s subsequent investigation led to the arrest of the five suspects.  These actions should put criminals on notice that we will relentlessly pursue those who seek to rob seniors of their hard-earned savings.

The Aging Committee’s year-long campaign to combat the IRS impersonation scam has had encouraging successes.  When we began our investigation, it was estimated that an IRS imposter reeled in one victim for every 60 threatening calls.  Now, thanks to increased public awareness, it takes a con artist more than 400 calls to trick someone into falling for this scam. 

Still, far too many victims are losing their hard-earned money and, often, their retirement savings, to these criminals.  The iTunes variation on the IRS impersonation scam underscores the point that, while law enforcement, consumer protection and aging agencies, and financial institutions have vital roles to play, alert citizens are our first and best line of defense.  Like scams, being aware and informed is never out of season.