IRS warns of four hot summer tax scams

Feeling left out because tax scammers have been focusing lately on tax preparers?

Don’t. Crooks likely will be calling or sending you an email soon enough.

Scam keyboard by stuartmiles99 via iStock_000019459874XSmall

The Internal Revenue Service says that everyone, individual taxpayers and tax pros alike, are potential victims of identity theft schemes as we head into what used to be a slower time for taxes.

“We continue to urge people to watch out for new and evolving schemes this summer,” IRS Commissioner John Koskinen said in an alert issued today, June 26. “Many of these are variations of a theme, involving fictitious tax bills and demands to pay by purchasing and transferring information involving a gift card or iTunes card. Taxpayers can avoid these and other tricky financial scams by taking a few minutes to review the tell-tale signs of these schemes.”

Tax pro targets: Cyber crooks most recently have been trying to lure tax professionals into sharing their professional data and IRS ID numbers.

If the phishing con artists can get their hands on that info, it makes it incredibly easy for them to file harder-to-spot fake tax returns claiming fraudulent refunds.

Taxpayers in con artist sights, too: Those fake filing/refund money goals are the same for cons who target individual taxpayers. Once they con us into revealing our personal and tax data, then the criminals file returns using our names, address and ID numbers, but have the fake refunds sent to the illicit accounts.

Other tax criminals pretend to be IRS agents and demand payment for federal tax bills that we don’t really owe.

Koskinen and his agency today issued specific warnings about four types of tax scams that are prevalent so far this summer.

“Robo-call” Tax Bill Messages: The pervasive telephone tax scam in which crooks pretend to be IRS agents is still around. In this automated version of what’s been dubbed biggest tax scam ever, crooks pretend to be IRS employees and leave messages demanding the victims call the given number back to discuss immediate payment of a purported overdue tax bill. If you don’t call back, according to the scam message, a warrant will be issued for your arrest.

When you do connect, the fake tax agent demands immediate payment either by a specific prepaid debit card or by wire transfer, again usually under threat of arrest or other legal action.

Don’t fall for it. The IRS does not call and leave prerecorded, urgent messages asking for a call back. Simply ignore this message. You can, if you want, save it to play at parties to educate and entertain your guests.

EFTPS Scam: This variation of the original phone con showed up earlier this month across the United States. Here the calling crook invokes the real IRS e-payment option known as EFTPS, or Electronic Federal Tax Payment System.

In this ruse, con artists claiming to be from the IRS call taxpayers and demand immediate payment of due taxes. To bolster the lie, the crooked callers say that two certified letters mailed to the taxpayer were returned as undeliverable. The scammer then threatens to arrest the victim if he/she doesn’t immediately make a payment by a specific prepaid debit card. The caller says the debit card is linked to EFTPS. It isn’t. Instead, it goes directly to the scammer.

And in order to slow down investigation of the con, the scammer also tells victims not to talk to their tax preparer, attorney or the local IRS office until after the payment is made.

Scams Targeting People with Limited English Proficiency: Crooks, tax and otherwise, usually seek out the most vulnerable as targets. In the tax scam world, these often are taxpayers for whom English is not their native language and who also have limited proficiency in their adopted country’s tongue.

The IRS continues to receive reports that these folks nationwide are targets of phone scams and email phishing schemes.

In these specific schemes, con artists often approach victims in their native language. They tell their victims they owe the IRS money and must pay it promptly through a preloaded debit card, gift card or wire transfer. If the payments aren’t made quickly, the crooks then threaten the victims with, among other things, deportation, police arrest and license revocation.

Private Debt Collection Scams: Under a new law, the IRS recently turned over some overdue tax accounts to private bill collectors. Now the IRS and consumer advocates are worried that con artists will use the collection agency angle to steal from taxpayers.

If a real, IRS-hired debt collector does have your tax case, you should have received letters, not only from the IRS, but also from one of the LINK four authorized collection agencies.

The IRS notes that the IRS, the number of these cases is small. Also, if you’re in that limited collection category, you should already be aware of your long-over tax debt. In fact, the IRS would have previously contacted you and similarly situated owing taxpayers about these debts.

So far, the IRS hasn’t received any reports of tax cons using a private debt collection ploy, but be careful. You don’t want to be the first — or any! — victim of this — or any! — type of tax scam.

Look for scam signs: You’ve heard and read these warnings before, but they bear repeating since the crooks are letting up in their efforts to steal your identity and money.

The IRS (and its authorized private collection agencies) will never —

  • Call to demand immediate payment using a specific payment method such as a prepaid debit card, gift card or wire transfer. The IRS does not use these methods for tax payments. Any and all tax payments should only be made payable to the U.S. Treasury, never to third parties.
  • Demand that taxes be paid without giving the taxpayer the opportunity to question or appeal the amount owed. The IRS usually first mails you a bill that you can examine and dispute. 
  • Ask for credit or debit card numbers over the phone.
  • Threaten to immediately bring in local police or other law-enforcement groups to arrest a taxpayer for not paying.

If you know you don’t owe taxes and don’t have any reason to think you’ve underpaid Uncle Sam, then —

  • Don’t give out any information. Hang up immediately.
  • Do contact the Treasury Inspector General for Tax Administration (TIGTA) to report the call. Use TIGTA’s IRS Impersonation Scam Reporting web page or call toll-free (800) 366-4484.
  • Do report the scam attempt to the Federal Trade Commission (FTC). Use the online FTC Complaint Assistant on Add “IRS Telephone Scam” in the notes section.

If you know or think you might owe taxes, then —

  • View your tax account information online at to see the exactly how much you owe. Then review your payment options.
  • Call the number on any billing notice you’ve received.
  • Call the IRS toll-free at (800) 829-1040 to talk with a real IRS representative about your options.

Be wary, stay alert: The bottom line is to be skeptical.

Even if you know you owe, don’t automatically take the word of any caller or unknown e-mailer. Double check your tax debt situation. Then talk with a tax pro and/or the IRS about how you can clear things up legally.

It’s no fun to pay the IRS additional tax, but it’s far better to have the money go to the real U.S. Treasury and not a crook’s account.

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20th Anniversary IRS Restructuring Comm’n Report

In the 1990s, tax reform was about as big of a focal point as it is today.  Some of the reasons were rate reduction and international competitiveness. There were a few concerns about IRS activities, such as a technology modernization effort that cost over $2 billion with little results. A commission was created by P.L. 104-52 (11/19/95). This 17-member group was the National Commission on Restructuring the IRS, co-chaired by Senator Kerrey (D-NE) and Congressman Portman (R-OH).

The Commission’s report was released on 6/25/97. Its eight sections addressed:

  1. Congressional Oversight, Executive Branch Governance, IRS Management, and Budget
  2. Workforce and Culture
  3. IRS Strategic Objectives: Customer Service, Compliance, and Efficiency Gains
  4. Modernization
  5. Electronic Filing
  6. Tax Law Simplification
  7. Taxpayer Rights
  8. Financial Accountability
The report led to the  IRS Restructuring and Reform Act of 1998 (PL 105-206 (7/22/98)).

E-filing really took off after the Act. A few other items also took place, but not everything. IRS systems are still in need of modernization and there are continuing issues with workforce (such as an aging and declining workforce) and budget deficiencies.

In 2010, TIGTA issued a report – The Internal Revenue Service Restructuring and Reform Act of 1998 Was Substantially Implemented but Challenges Remain.

In April 2017, the AICPA, along with other tax practitioner groups, released a framework for IRS reform, that ties to the 1997 report. The introduction to this report states:

As we approach the 20th anniversary of the Report of the National Commission on Restructuring the Internal Revenue Service (“Restructuring Commission” or “commission”), we recommend that any effort to modernize the Internal Revenue Service (IRS or “Service”) and  its  technology infrastructure should build on the foundation established by the Restructuring Commission.  The similarities between  the  condition  of  the  IRS  today  and  the  circumstances  that  motivated  the creation of the Restructuring Commission are striking.”

The IRS faces many challenges – dealing with a complex tax law, the public’s low understanding of what they do, insufficient funding, and technology that isn’t as modern as needed.

What do you think?


Tax professionals are target of yet another ID theft scam

Based on the fast and furious pace of tax scams this month, you’d think it was high tax season instead of summer.

For the second time in just more than a week, the Internal Revenue Service has issued a new tax scam alert. (In case you missed it, the pervasive tax telephone scam was recently tweaked.)

Phishing scam hook keyboard

This latest scam warning is for tax professionals, who are receiving phishing emails purportedly from a tax software education provider. The fake communication asks for the tax preparers’ help in repairing a failure in the message sender’s sham database.

To that fake end, the cyber crooks want the tax pros to send them what the IRS describes as an unusual amount of sensitive preparer data.

Unknown origin, but typical data sought: The IRS is still investigating this new phishing scam, which uses the name of a real U.S.-based preparer education firm. (The IRS did not provide the company’s name in issuing its warning to tax pros.)

So far, the email’s origin is unknown. It could be from cyber criminals operating within the U.S. or abroad.

Regardless of the source, the goal is the same as all tax identity theft schemes, to get enough personal info to successfully file fake tax returns and claim fraudulent refunds.

Here’s the fake email’s text that is showing up in tax pros’ in-boxes:

In our database, there is a failure, we need your information about your account.

In addition, we need a photo of the driver’s license, send all the data to the letter. Please do it as soon as possible, this will help us to revive the account.

*Company Name *

*EServices Username *

*EServices Password *

*EServices Pin *

*CAF number*

*Answers to a secret question*

*EIN Number *

*Business Name

*Owner/Principal Name *

*Owner/Principal DOB *

*Owner/Principal SSN *

*Prior Years AGI

Mother’s Maiden Name

Obviously, if the con artists get the requested info — particularly tax pros’ e-Services credentials such as an Electronic Filing Information Number (EFIN), Preparer Tax Identification Number (PTIN) and Centralized Authorization File (CAF) number — the crooks will have a field day filing fake 1040s.

Tax pros now preferred by ID thieves: Since the IRS and its Security Summit partners have been increasingly successful in stemming individual taxpayer scams, tax pros are now the preferred target of identity thieves.

But why would any tax pro in this day and age fall for such a request?

Some folks are just naturally trusting. Others see a message from what appears to be a company they’ve worked with for years and want to help.


Stop being so cooperative and helpful. Stop trusting any emails asking for your or clients’ personal information.

Just stop. Sadly, the time of being a nice guy or gal tax preparer has passed.

Remember, legitimate businesses and organizations never ask tax professionals for usernames, passwords or sensitive data via email. Even if you are asked, never provide such sensitive information via email.

All this tax pro tax scam advice leads to this week’s By the Numbers figure: 0. As in nada, nil, zilch, zero.

As in zero tolerance for any questionable calls or emails or even snail mailed correspondence seeking personal or professional tax-related info.

Recovery steps if scammed: If, however, the worst does happen and you, a tax professional, do fall victim to this or other tax scam emails, forward a copy to

If you disclosed any credential information, contact the e-Services Help Desk to reset your password.

And if you disclosed information and taxpayer data was stolen, contact your local stakeholder liaison.

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One Year Anniversary of House Republican Tax Reform Blueprint

On June 24, 2016, the House Republicans released their “A Better Way” blueprint for tax reform. Obviously as part of an election strategy. On November 9, 2016, with Republican victories all around, I thought there would be fast track activity to draft legislative language to be released early in the 115th Congress.  We haven’t seen any legislative language yet although I suspect some exists.

The details of the plan can be found in the full report of the Republicans and a July 2016 article I have on it. The blueprint seems to have hit a few roadblocks, most notably the tax on imports. Note that this is not a tariff. Instead, imports are taxed by not allowing a deduction for them. Likewise, exports are tax-free by removing export revenue from the tax base. The goal is to make the business tax a consumption tax that can be border-adjustable (per the report).

Many taxpayers are not in favor of the import treatment, most notably retailers with lots of imports, as well as oil companies (and others). For example, see the National Retail Federation’s website on “BAT is a Bad Tax.” [BAT = Border Adjustable Tax]

The import tax though generates a lot of revenue to help pay for lowering the corporate tax from 35% to 20% and the maximum tax on passthrough business income from 39.6% to 25%.  So, it is an important part of tax reform.

The blueprint includes several simplifications and several open questions to be resolved. Drafting legislative language is difficult as changes have effects on several other parts of the law, transition rules must be addressed, and there were several questions left open in the report.

Meanwhile, it it not identical to President Trump’s plan and the Senate doesn’t yet have a formal plan. However, this past week, Senate Finance Committee Chairman Hatch formally asked for suggestions – due by July 17.

Also, on June 20, Speaker Ryan delivered a speech on tax reform to the National Association of Manufacturers. He would like to see tax reform by the end of 2017 [CNBC, “Speaker Paul Ryan tries to save ‘crown jewel’ of GOP agenda: Tax reform,” 6/20/17.]

There are additional agenda items for Congress and President Trump for this year, including work on the Affordable Care Act, passing a budget, and dealing with the debt ceiling.

What do you think? Will we see tax reform by the end of the year?

Bill collectors accused of using financially dubious tactics to collect unpaid IRS debts

Anna-Faris as Cindy-Campbell_Scary-Movie frightening phone call

Private bill collectors are, according to four U.S. Senators, making calls about overdue federal taxes that could put taxpayers in financially compromised situations that are scarier than those faced by the terrified Cindy Campbell character (played by Anna Faris, pictured above), in the “Scary Movie” films.

During a recent U.S. House hearing, Internal Revenue Service watchdogs told Representatives that, less than two months on the job, private tax bill collectors were already breaking collection and consumer protection rules.

Now four Democratic Senators have raised additional concerns about one of the private collection agencies’ tactics, which could put owing taxpayers’ homes and retirement savings at risk.

Questionable collection scripts: The lawmakers sent a letter, first reported in today’s New York Times, on Friday, June 23, to Pioneer Credit Recovery and its parent company Navient about the overdue taxes collection scripts its employees use.

The Senators — Elizabeth Warren of Massachusetts, Ben Cardin of Maryland, Sherrod Brown of Ohio and Jeff Merkley of Oregon — are troubled that Pioneer is, according to the letter, “pressuring taxpayers to use financial products that could dramatically increase expenses, or cause them to lose their homes or give up their retirement security.”

In addition to making general suggestions about how to pay their overdue taxes, such as getting a bank loan or cashing in investments, the letter says that one of Pioneer’s collection scripts also advises its agents to give taxpayers repayment options that are “extraordinarily dangerous for taxpayers’ financial security.”

The questionable recommendations include taking on added credit card debt, obtaining a second mortgage and borrowing against a 401(k) retirement account.

Spotlight on Pioneer: Warren et al focus on Pioneer’s collection practices. “No other debt collector makes these [aggressive payment option] demands,” according to the letter.

The scrutiny is not a total surprise.

Pioneer was sued this year by the Consumer Financial Protection Bureau for allegedly systematically misleading borrowers. The collection agency’s parent company Navient has denied wrongdoing and is fighting the lawsuit.

In addition, Navient has come under scrutiny in connection with previous federal collection contracts. Its deal to collect overdue student loan debt for the Education Department was terminated after it was determined that Navient gave borrowers inaccurate information about their loans at “unacceptably high rates.”

All push installment limits: However, all four of the collection companies hired by the IRS — in addition to the Horseheads, New York-based Pioneer, the IRS is using CBE Group of Cedar Falls, Iowa; ConServe of Fairport,. New York; and Performant Recovery of Livermore, California — are telling tax debtors that they can set up an installment plan lasting as long as seven years.

That’s two years longer than the span that private collectors are legally allowed to offer.

J. Russell George, Treasury Inspector General for Tax Administration (TIGTA), raised the extended payment plan issue last month during a House Appropriations subcommittee hearing.

Low income issues ignored: During that same hearing, IRS National Taxpayer Advocate Nina Olson expressed concern that all of the private tax debt collectors were assigned accounts of taxpayers who make below-poverty level wages and/or had incomes of less than 250 percent of the poverty level.

The IRS has discretion to make exceptions for tax debtors who would have difficulty meeting their daily living expenses if they paid their tax bills.

Olson, based on her Capitol Hill testimony and comments this week to the New York Times, is worried that such income considerations and leeway are not part of the private collection agencies’ procedures.

Short- vs. long-term results: Aggressive collection techniques, say Olson and other consumer advocates, could push financially strapped taxpayers to the brink.

As the newspaper notes:

“The idea is that pushing taxpayers to the limit, while temporarily good for the I.R.S., causes long-term strain on the government over all. No one wins, the theory goes, when taxpayers wind up on public assistance from settling overdue tax bills. The I.R.S. does not try to collect from people who make only enough to afford basic living expenses like food, housing and transportation. (Only one collector, Performant, had lines in its scripts about how to handle hardship cases. Those accounts should be marked and returned to the I.R.S., Performant instructed its employees.)”

IRS, TIGTA looped in: The Senators’ letter, which was copied to IRS Commissioner John Koskinen and TIGTA, urges Pioneer to “remedy these matters and to end potential taxpayer abuse immediately.”

The lawmakers also want some specific proof that action is taken. They’ve asked Pioneer to:

  1. Modify all scripts so they comply with the law, your contract, and IRS policy.
  2. Review all previous taxpayer interactions and retroactively address problems caused by the faulty scripts.
  3. Send all revised and final call scripts to our staff and brief our staff on these matters within two weeks.

I suspect that even when/if Pioneer meets the Senators’ demands, a hearing will be held on the matter.

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Fee-free PTINs are available again at IRS website

Efiling tax return computer key

After a brief hiatus, the Internal Revenue Service has reinstated its online tool where professional tax preparers can obtain the official identification numbers required to file returns.

On June 1, the United States District Court for the District of Columbia issued a mixed ruling in a class action lawsuit against the IRS, Adam Steele, et al. v. United States of America (Case No. 1:14-cv-01523-RCL).

The federal judges said that while ruled that while the IRS has the authority to require tax pros to get Preparer Tax Identification Numbers, or PTINs, the tax agency cannot charge for the ID numbers.

The next day, the IRS took its online PTIN tool offline. On Wednesday, June 21, it reactivated the system.

So if you’ve been waiting to get or renew your PTIN, wait no more.

Other PTIN options also are back: With the resumption of PTIN issuance, the PTIN Helpline also has reopened.

And if you’re a tax pro and simply want to check your continuing education, now that the PTIN system is back all the previous information there is once again available in your PTIN account.

PTIN graphicNext PTIN steps: As for the future of ID number fees and what might happen to the previously paid PTIN amounts, the IRS says it is working with the Department of Justice and “considering how to proceed.”

When it has additional information about past or future PTIN fees, the IRS promises to post it on the Tax Pros page. (And I’ll share it with you here at the ol’ blog, too.)

What is certain is that the IRS can continue to require tax preparers to get PTINs if, per the IRS announcement on the reopening of the PTIN system, the person “prepares, or assists in preparing, all or substantially all of a federal tax return for compensation.”

PTIN FAQs and follow-up: If you have more questions about the IRS required tax numbers, the IRS has created a checklist to help you start the PTIN application process.

You also can find more at the IRS’ updated PTIN FAQ page.

As for previously paid PTIN fees, don’t call the IRS. It hasn’t decided yet whether to appeal the ruling, much less how to handle any possible refunds.

Instead, any questions about claims should go to the PTIN Fees Class Action Administrator, who can be reached at the case’s Web page.

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2017 IRS Tax Forums

The 2017 IRS Tax Forums are approaching. Have you registered for one yet? Dates/locations include:

Orlando, FL: July 11-13 

Dallas, TX: July 25-27

National Harbor, MD: August 22-24

Las Vegas, NV: August 29-31

San Diego, CA: September 12-14

As you may already know, attending the IRS Tax Forums provides you with the opportunity to earn up to 18 CE Credits from over 37 seminar classes. But you can get that from multiple other sources. In our minds, there are 2 unique benefits to attending the Tax Forums.

Peer to Peer Interaction

Thousands of tax professionals attend these seminars each year. Where else can you get that kind of interaction with fellow tax professionals and tax business owners from various other parts of the country? Having peers to talk to about the challenges you face in the industry is extremely important for growth and sanity.

Learn about the latest products

The IRS does a great job of wrangling up tax vendors from across the country. Attending the forums gives you an opportunity to visit with multiple tax industry vendors, all in one place, and obtain detailed product and service information and demonstrations. Where else can you learn about the latest products and get to test them in person?

Here’s another bonus: our team attends all of them. Come learn more about The Income Tax School and meet our team in person!

Click here for details on the forum.

Hope to see you there!