The Most Surprising Tax Complaint in America

Tax ID theft has grown so quickly that it accounts for one-third of all consumer complaints about the crime, the Federal Trade Commission said Monday. And complaints about fake IRS agents trying to scam consumers grew more than 20-fold last year, the agency said.

The problem is so bad that the agency created Tax Identity Theft Awareness Week, which began Monday.

“We’ve seen an explosion of complaints about callers who claim to be IRS agents — but are not,” said Jessica Rich, director of the Federal Trade Commission’s Bureau of Consumer Protection. “IRS employees won’t call out of the blue and threaten to have you arrested or demand specific methods of payment.”

The statistics about the two tax-related crimes come from the FTC’s Consumer Sentinel database, which collects complaints received by the FTC and other federal, state and local law enforcement and consumer protection agencies. In 2013, the FTC received 2,545 complaints about IRS impostor scams; in 2014 that number increased to 54,690. In 2014, the FTC received 109,063 complaints about tax identity theft, accounting for 32.8% of the 332,646 overall complaints about identity theft.

Growth in the IRS agent imposter scam is staggering. The FTC said it received only 94 complaints about the scam in July 2013. In November of 2013, 8,293 complaints were filed. While not every complaint comes from a victim who actually lost money, many have — which explains why the crime persists. The IRS says consumers have collectively paid $14 million to the scammers.

The calls can sound convincing. Lauren Oak, a Long Island mom, got a call last year from a scammer claiming county sheriffs would arrive at her house within 24 hours unless she paid a $16,000 tax bill immediately.

“It was really terrifying. I kept thinking, ‘what will I do with the kids?’” she said.

Tax ID theft is fairly straightforward. Criminals submit a tax return in your name before you do, and steal the refund. While the IRS is scrambling to install back-end systems that detect the crime, consumers have a simple defense against it: File early. The sooner you file, the less likely there will be time for a criminal to file first.

That’s no guarantee you’ll avoid any issues, however. When the IRS gets more than one tax return associated with a Social Security number, the rightful SSN holder often has to deal with a series of hassles, including a delayed refund.

Awareness is the best defense against the IRS agent impostor scam. IRS agents don’t call consumers with threats of jail time for unpaid taxes. Notices are sent via U.S. mail, the agency says.

“If someone calls unexpectedly claiming to be from the IRS with aggressive threats if you don’t pay immediately, it’s a scam artist calling,” said IRS Commissioner John Koskinen in a warning that agency issued about the scam on Friday. “The first IRS contact with taxpayers is usually through the mail. Taxpayers have rights, and this is not how we do business.”

Here are five telltale signs that a caller is a scam artist, the IRS says. The IRS will never:

call to demand immediate payment, nor will the agency 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.

In the meantime, while you can’t necessarily prevent yourself from becoming a victim of this crime, there are steps you can take to reduce your risks, and to spot fraud and work to correct it before it becomes a bigger problem. Check your Social Security Administration earnings statement each year for accuracy. Also check your credit reports regularly for possible signs of fraud, such as accounts that aren’t yours. You can get your credit reports for free once a year from AnnualCreditReport.com, and you can get a free credit report summary, updated every 14 days, on Credit.com.