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IRS Workload Gives Scammers Opportunities to Cheat Taxpayers (1)

July 22, 2021, 8:46 AMUpdated: July 22, 2021, 3:34 PM

In the 1979 film, “When A Stranger Calls,” the family babysitter, played by Carol Kane, is terrorized by a threatening caller. She calls the police, who tell her to keep the caller on the line long enough to trace the call—this, in the days before caller ID. The police eventually advise her that the calls are coming from inside the house.

It’s a scary and iconic moment—one that we’ve seen recreated again and again, perhaps most famously in Wes Craven’s 1996 flick, “Scream.”

What makes that scene so compelling is the feeling that we’ve all had that we could be trapped with the thing that might destroy us.

I couldn’t help but think of that when reading about recent problems with the IRS and the child tax credits.

To be clear, I’m not suggesting that the IRS is causing its own problems. Far from it. But maybe the real danger isn’t coming from the outside. What if the very thing that threatens to destroy it is coming from the inside—its own workload?

According to National Taxpayer Advocate Erin Collins, the IRS had a backlog of more than 35 million individual and business income tax returns that required manual processing at the end of the 2020 season.

So, the IRS is overwhelmed. But you already knew this.

And when Congress tasked IRS with delivering the advanced child tax credit payments, we knew there would be more problems. This time, the IRS, having learned a thing or two from delivering the stimulus checks, was ready. Its website was loaded with tools, including a portal that allowed taxpayers to unenroll to stop getting advance payments and provide or update bank account information for monthly payments. Non-filers who had not already given the IRS information could submit their information through another portal. And, taxpayers were able to check online if they qualified for advance payments.

The first payments were sent out on July 15. It was a colossal undertaking: The first batch of advance monthly payments worth roughly $15 billion was sent out to 35 million families. Most—about 86%—were sent by direct deposit.

Bumps were to be expected. As with the stimulus checks, taxpayers are reporting problems. Some taxpayers expressed frustration that the amounts delivered weren’t correct, while others could not opt out of future payments. Some taxpayers who successfully opted-out—they thought—received payments anyway. And, as with the stimulus checks, there were many questions about how to receive or return payments.

Only, there was no one to help. At least not at the IRS.

During the 2021 filing season, the IRS also received 167 million telephone calls, more than four times the number of calls in 2019. But only 9% of callers reached a live person.

That was before the child tax credit payments were sent out.

Today, the IRS still isn’t picking up the phone. But the scammers are ready to jump in.

Taxpayers and families are not required to make a purchase or pay up-front fees to claim, speed up, or increase their payments. There are no tricks for checking on benefits or jumping the line, but scammers are happy to give the impression that they can help—for a fee.

In June, the Taxpayer Advocate warned about potential scams by those offering to help taxpayers get their money.

The Better Business Bureau and the Federal Trade Commission have issued similar alerts. This week, Florida Attorney General Ashley Moody recently posted a warning that recipients of the Child Tax Credit payments may be targets for scammers. And on Thursday, IRS Criminal Investigations issued an additional alert for taxpayers.

There are several ways that scammers are trying to take advantage of taxpayers seeking answers about the child tax credit. Some are tried and true—like calling, texting, or direct messaging taxpayers to ask for money or information.

A more sophisticated effort involves the web. According to information-security firm DomainTools, Nigerian scammers have created more than 50 fake U.S. government websites to collect personally identifying information like birthdates and Social Security numbers and out-of-wallet information like your mother’s maiden name. The websites have names like “AmericanReliefPlan.com” and “ReliefCareFunds.com” and pretend to be connected to the American Rescue Plan Act of 2021.

The IRS has stressed that taxpayers should only update their information via secure access on the IRS child tax credit portal. The portal is found on the official IRS website, irs.gov.

The IRS has also warned taxpayers not to provide information in response to advertisements, especially any individual or company asking for personal or financial information. The IRS also makes clear that the government will never ask taxpayers to pay by cash, gift card, credit card, wire transfer, or cryptocurrency to get help with payments. Official government tax-related information assistance is always free.

And that’s the problem, right? The assistance is free—assuming you can get it. The failure of the IRS to be available to taxpayers with questions may be feeding the monster. That isn’t likely to change anytime soon.

Maybe someday we’ll get to a place where taxpayers can pick up the phone and simply call the IRS when things go wrong. The best we can hope for in the meantime is to get the word out about available programs and make taxpayers aware of potential scams. A good rule of thumb: If you think something is too good to be true, it probably is. You can find out more about potential scams at the IRS Tax Scams/Consumer Alerts.

And, if you become aware of any tax scams—from phishing to phone/text solicitations— you can report it to the IRS and help protect other taxpayers.

Tax is increasingly global. But how do you navigate tax laws and international business etiquette at the same time?

Terri Morrison, author of “Kiss, Bow, or Shake Hands®: The Bestselling Guide to Doing Business in More Than Sixty Countries” will be joined by Nancy Stafford, incoming chair of the International Law Section of the American Bar Association, and Gretchen Bellamy, Senior Director of International Diversity, Equity & Inclusion for McDonald’s, to discuss working with international colleagues and clients in a free virtual event hosted by me on July 28 at noon EST. You can listen in here, no registration required.

This is a weekly column from Kelly Phillips Erb, the Taxgirl. Erb offers commentary on the latest in tax news, tax law, and tax policy. Look for Erb’s column every week from Bloomberg Tax and follow her on Twitter at @taxgirl.

(Adds new IRS alert in 17th paragraph. Earlier version corrected movie date in 1st paragraph.)

To contact the reporter on this story: Kelly Phillips Erb in Washington at kerb@bloombergindustry.com

To contact the editors responsible for this story: Rachael Daigle at rdaigle@bloombergindustry.com; Colleen Murphy at cmurphy@bloombergtax.com

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