In one popular scheme, people impersonating IRS agents call taxpayers, claim they owe taxes, and demand immediate 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. The callers can manipulate caller ID to make it look like they are calling from an IRS phone number; in some cases they know the last four digits of the taxpayer's Social Security number.
"We have seen scams based on unsolicited text messages and aggressive phone calls," said David Pollino, senior vice president and enterprise fraud prevention officer at Bank of the West in a recent interview. "We've seen scams in which people call claiming to be with the IRS, saying, 'We'll arrest you if you don't wire money to us immediately.'"
IRS fraud happens every year in March and April. Last year, more than 20,000 taxpayers fell victim to the scam and lost millions.
What's different this year is the volume of such fake calls.
Some of the calls are very sophisticated, and the fraudsters cite the right regulations and government bodies and might mention the local police department or district attorney.
On any given day, there may be as many as 9,000 phone calls associated with the IRS scam!
"We saw a spike back in 2011, when we first started aggressively tracking it, right around this time when you expect tax season to be," said Jonathan Nelson, product manager and digital reputation manager for Whitepages. "It's been fairly constant up until early 2014, since then it's been on a rise. Right now it averages about 2.5% of all the fraud we see."
Having compared the Federal Trade Commission's complaint records of fake calls to activity in Pindrop's honeypot, Dewey estimates that only 20% of the people getting hit by this scam are reporting it to the FTC.
"They're either going along with it or silently ignoring it," he said.
Who is being targeted?
Pindrop's analysis of the geographic coverage of these calls shows an even distribution across the country.
"Based on the dialing patterns we've seen from the fraudsters, they'll try their scam on anyone and everyone they can get on the phone," Dewey said. "Our intuition behind why they (the fraudsters) are using such a broad blanket technique is that there's a high rate of folks that would believe the IRS is calling, that they are in some kind of trouble."
Some might still owe the IRS money from last year. Others might feel vulnerable because of a related legal issue, such as a shaky immigration status.
What a Bank Can Do
The first step in preventing IRS fraud is educating consumers, although that appears to seldom work. Some consumers report such scams, but they can't be counted on to recognize the signs of fraud.
Banks can ask customers a few questions before executing wire transfers. For instance, the IRS has stated that it will never call to demand immediate payment, call about taxes owed without first having mailed a bill, demand that a consumer pay taxes without giving the opportunity to question or appeal the amount owed, require the use of a specific payment method such as a prepaid debit card, or threaten to bring in local police or other law-enforcement groups to have the consumer arrested for not paying. By questioning customers about why they're sending the money, call center reps could uncover telltale signs of foul play.
Bank Customers should openly discuss with their banker anytime they’re requested to send someone they personally don’t know – if they did, fraud could be substantially reduced!
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