Picture this…you’re sitting at home watching your favorite TV program, and your phone rings. You look at the caller id and it says ‘Internal Revenue Service’. Someone that sounds very official provides you with their ‘IRS identification badge number’ and tells you in no uncertain terms that you do indeed have a tax debt. They may use some scare tactics or try to confuse you. They may ask for a debit card number to pay your supposed tax debt over the phone, or may even threaten to come to your house with a law-enforcement member.
This is not the IRS. What you are dealing with is a telephone scammer.
***Update March, 2017*** Thanks to the new law that passed, the "FAST Act", the IRS will soon begin using third party collection agencies to collect on certain tax debts. These collection agencies will be making telephone calls to people with tax debts. Confusing, eh?
So how would the IRS contact me?
It’s rare that the IRS would call a taxpayer; an exception to this rule is if you are currently working with an IRS agent regarding a tax issue and they have your direct contact information. There are some other giveaways that you're dealing with a scammer:
- They ask you to provide your social security number for verification purposes
- They demand you pay a bill you've never heard of
- They get upset if you question their authority or ask to speak to their manager
The IRS has been so bold as to say on irs.gov that they will never:
- Call to demand immediate payment, nor will we call about taxes owed without first having mailed you a bill
- Demand that you pay taxes without giving you the opportunity to question or appeal the amount they say you owe
- Require you to use a specific payment method for your taxes, such as a prepaid debit card
- Ask for credit or debit card numbers over the phone
- Threaten to bring in local police or other law-enforcement groups to have you arrested for not paying
When the IRS needs to contact you regarding a tax problem, they will do so by mail
Not email…but good old fashioned mail. Like, paper letters put into your mailbox by your postman. As tempting as it is to throw these letters away, or let them pile up unopened, don't do it! The longer you ignore an IRS issue the worse it gets.
Audit by Mail
We've had clients contact us because they received a letter in the mail saying they were being audited and were concerned it might be a scam. This actually is a real thing; an Audit by Mail is an IRS tool used to verify income and expenses claimed on tax returns.
The audit letter is going to outline the issues involved and will specify what types of information you need to supply to the IRS. They may ask for an itemized list of expenses or deductions in question, or they may ask you to verify an amount claimed. If you’re not able to do so, you have the option of explaining the issue and how exactly you determined the amount reported on your tax return. There is a 30 day deadline to fill out all of the required information and get it back to the IRS. If you need additional time you can call the phone number on the letter to explain your situation and request an extension on replying to your audit.
After the IRS reviews your audit submission they will then send out a new letter accepting or proposing changes to your tax return (we’d explain exactly how they determine if they accept it or not, but coming up with exact parameters isn’t an IRS specialty). If they propose changes you’ll get 2 additional forms:
- Form 4549 – Income tax examination changes: This explains the proposed changes to your tax return
- Form 886-A – Explanation of items: This describes the specific changes and why your documentation was not accepted
If you understand and agree with the proposed changes, you’ll sign Form 4549 and return it to the IRS along with your payment if due. If you can’t afford the payment, there are options! Your options here are to apply for an installment agreement, an offer in compromise, a partial payment plan, innocent spouse relief if applicable, or apply for hardship status.
If you disagree or don’t understand…don’t sign it! You’ll want to gather more evidence or law to support your case so that you can start to go up the chain of command at the IRS to fight the good fight. If you feel like you have a good case you can move forward with IRS Appeals or take it a step further and head to Tax Court.
If you don’t respond, the next piece of mail you’ll get from the IRS is a Notice of Deficiency. This letter will advise you about your delinquent taxes plus any penalties and interest; you’ll then have 90 days to dispute the tax assessment. If you take no action the audit will become final (as in, legally binding final) and the IRS will begin the collection efforts.
Bottom line: Be very wary of IRS phone and email scams.
If you are unsure if you actually have an IRS issue and don't know where to turn, contact us. We can help. Call us at 888-727-8796 or email email@example.com. Learn about our diagnosis service here. We can contact the IRS on your behalf and find out exactly what they think about you (without raising any red flags!).