TIGTA’s Top Cop Issues Warnings on Tax Scams at Senate Hearing

Mar 16th 2015
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In the wake of the IRS releasing its annual “Dirty Dozen” list of tax scams, Timothy P. Camus, deputy inspector general for investigations at the Treasury Inspector General for Tax Administration (TIGTA), appeared at a hearing before the Senate Finance Committee on March 12. Although Camus assured the committee that TIGTA is working earnestly to reduce fraud, especially during filing season, his testimony about the proliferation of tax scams is cause for concern.

Notably, Camus cited two tax such schemes that have proven to be “pernicious and dangerous.” They are “surprisingly effective and fast ways to steal money” from taxpayers. In this fast-paced electronic environment, TIGTA’s top investigator says that the money is gone before the victims ever realize they have been scammed.

The two scams singled out by Camus involved phone impersonations and false lottery winnings.

“The phone impersonation scam has proven to be so large that it is one of my agency’s top priorities, and it has also landed at the top of the IRS’s “Dirty Dozen” tax scams this year,” testified Camus. “The number of complaints we have received about this scam make it the largest, most pervasive impersonation scam in the history of our agency.”

Here’s how it works: The intended victim receives an unsolicited telephone call from a person claiming to be an IRS agent. The caller, using a fake name, gives the victim a “badge number,” and claims that the victim owes taxes and is criminally liable for an amount owed. The caller may even know the last four digits of the victim’s Social Security number.

Then the crook threatens the victim by stating that if money isn't paid immediately, he or she will be arrested, a suit will be filed or some adverse official action will be taken. This may include loss of a driver’s license or a business license or deportation. The callers often leave "urgent" callback requests and contact the victim multiple times. Although the scam initially targeted the most vulnerable people—for example, the elderly, newly arrived immigrants, and those whose first language is not English—it has been expanded to people from every walk of life.

To date, TIGTA has received over 366,000 reports of these calls, at a rate of between 9,000 and 12,000 each week. As of March 9, more than 3,000 individuals have been victimized by this scam and have paid a total of $15.5 million, averaging over $5,000 per victim. The highest reported loss by one individual was more than $500,000.

Lottery Scam: New Riff on Old Trick

The second scam highlighted by Camus in his testimony is the lottery winning scam. “The lottery winnings scam we are seeing this filing season is a continuation of an older scam. It starts with an email or telephone call stating that you have won the lottery and in order to collect the winnings, you need to send money to prepay the tax to the IRS. The lottery scam often, but not always, originates from outside of the United States, and continues because it capitalizes on a very common dream; getting rich quick and hitting the jackpot,” said Camus.

In one of the largest cases of this type, the criminals used mailing lists to send thousands of unsolicited emails, falsely informing victims that they had won a lottery or had inherited money from a distant relative. Follow-up emails instructed the victims to provide their personal and bank account information in order to receive their lottery winnings or inheritance. Subsequently, victims were falsely informed that a government agency or another organization, like the IRS or the United Nations, would not pay the money due to them because advance payment of tax and other fees was required. Then the victims were asked to wire the money to designated bank accounts controlled by the criminals.

Furthermore, if the victims were unable to pay the taxes and fees, the criminals offered to lend them the money. Targets were then convinced to open online bank accounts and provide the necessary login information to the criminals. Using this information, these con artists pilfered money from other bank accounts, transferred that stolen money to the victims' accounts and then instructed the victims to wire the money to foreign bank accounts they controlled. In the end, the “winners” never received anything—no lottery winnings, inheritance or other money—besides their own grief.

Camus touched on several other types of fraud impacting tax administration, including identity theft, prison fraud, unscrupulous tax return preparers and phishing. His testimony is available online.

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