Welcome to our new website feature, Scam of the Month. This feature is being published in an effort to educate our members on the types of scams they may encounter, as well as red flags that may help to stop a scam in it’s tracks. Each month, you’ll find a new scam listed here. After reading, you can review the red flags our trained Member Service Representatives noted in the story as well as find information on what to do if you’ve fallen victim to a similar scam. Our first story is below:
July Scam of the Month: A Costly Call
Scene: A quiet suburban home, early afternoon.
John was enjoying his Sunday afternoon, reclining in his favorite chair with a book in hand, when his phone rang. The caller ID displayed an unknown number, but curiosity got the better of him.
"Hello?" John answered.
"Good afternoon. May I speak with Mr. John Smith?" The voice on the other end was authoritative, which caught John’s attention immediately.
"This is he."
"Mr. Smith, my name is Agent Brown, and I'm calling from the Internal Revenue Service. This is a courtesy call regarding an urgent matter involving your tax filings."
John's heart skipped a beat. An IRS call was never good news. "What seems to be the problem?"
"There appears to be a discrepancy in your tax returns from the last five years. Our audit indicates that you owe a substantial amount in back taxes, penalties, and interest. If this amount is not settled immediately, legal action will be initiated against you."
John's mind raced. He had always been meticulous with his taxes. "How much do I owe?"
"According to our records, the total outstanding amount is $4,567.89. This needs to be paid today to avoid further penalties and possible arrest."
John's throat went dry. "I don't have that kind of money available right now. What can I do?"
"Given the urgency of this matter, we can offer you a solution to prevent legal actions. You can make an immediate payment using electronic gift cards. This will temporarily halt the proceedings and give you time to arrange the full payment."
"Gift cards? Are you sure that's how the IRS operates?"
"I understand your concern, Mr. Smith. Due to the severity of the situation, we have been authorized to use alternative payment methods to facilitate the process. You need to purchase electronic gift cards and provide me with the codes. This will be recorded in our system as a provisional payment."
John was skeptical, but fear clouded his judgment. "Okay, what kind of gift cards do I need to buy?"
"Please purchase Apple iTunes gift cards or Google Play gift cards. You can find these at any grocery store or pharmacy. You need to get a total amount of $2,500.00."
"Alright, I'll head out right now."
"Please stay on the line with me, Mr. Smith, while you make the purchase. This call is being recorded for verification purposes."
John grabbed his keys and wallet, his heart pounding. He drove to the nearest grocery store, still connected to "Agent Brown." In the store, he nervously picked out the gift cards, totaling the exact amount mentioned.
"Okay, I've got the cards. Now what?" John asked, standing in the parking lot.
"Scratch off the back of each card to reveal the codes and read them to me slowly. I'll input them into our system to verify your payment."
John followed the instructions, reading out each code as directed. After the last one, "Agent Brown" confirmed, "Thank you, Mr. Smith. Your payment has been recorded. You will receive a confirmation email within 24 hours. Have a good day."
The call ended, and John drove home, feeling a mixture of relief and unease.
The next day, John received no email from the IRS. Growing suspicious, he called the official IRS number. After a lengthy hold, he finally spoke to a real IRS agent.
"Mr. Smith, the IRS does not accept payments via gift cards. I'm afraid you've been scammed."
John's stomach dropped. He realized he had just $2,500 to a clever con artist.
Unfortunately, stories such as this are ever-increasing in our society. As technology and fraud detection methods have improved, scammers have found more creative ways to target and steal from honest individuals.
What Now?
Keep reading to learn about the Red Flags our MSRs spotted, as well as how to report this type of fraud and prevent future scams of this type.
Red Flags:
1. "Mr. Smith, my name is Agent Brown, and I'm calling from the Internal Revenue Service. This is a courtesy call regarding an urgent matter involving your tax filings.”
The IRS initiates most contact via regular mail delivered by USPS. While the IRS may make a phone call, taxpayers will generally receive several notices and letters from the IRS in the mail before that happens. Check out this link from the IRS: “How to know if it’s really the IRS”
2. "This needs to be paid today to avoid further penalties and possible arrest."
Scammers will often create a sense of urgency and fabricate a situation that nees immediate attention to prevent their victims from assessing the situation logically or seeking advice from others. Victims are more likely to make bad decisions when rushed.
3. “You can make an immediate payment using electronic gift cards.”
While the IRS does have several methods to pay their outstanding tax balances, gift cards are not one of the approved methods. Scammers often use these as an option because they are easy to obtain, and once the funds have been claimed from the gift card they cannot be retrieved.
4. “Please stay on the line with me, Mr. Smith, while you make the purchase. This call is being recorded for verification purposes."
The scammers do not want to let you off the line when completing these transactions, in part to continue the sense of urgency mentioned above, but also to prevent you from asking for advice from others or perhaps calling the IRS directly and uncovering the scam. In situations where victims attempt to disconnect the call, the scammers will often concoct different reasons why you must stay on the line, such as the call being recorded for verification purposes.
Reporting the Fraud
Unfortunately, it’s likely that Mr. Smith’s money is gone and cannot be retrieved. Here are some actions he can take to report the fraud:
- Contact the Gift Card Issuers – occasionally if the scammer did not immediately claim the funds they may be able to freeze the cards for you.
- Report the scam to the US Treasury Inspector General
- Report the scam to the Federal Trade Commission
Preventing Future Scams
- Educate yourself and others – you’re off to a great start by reading this feature! You can read about more scams in future months here on our site, or by visiting the FTC’s Scams site.
- Verify Caller ID/Contact Information - If you receive a call from someone claiming to be from a government agency, hang up and call the official number of the agency to verify the claim.
- Monitor Your Financial Accounts – since Mr. Smith did not give out any account information, it’s not necessary to close his accounts or plastic, but keeping on top of the types of activities you normally see in your accounts is a great way to help you spot abnormalities and protect yourself.
If you have heard of a scam or have fallen victim to one and would like to share your story, you can email us at [email protected]. Reference Scam of the Month in the subject line and we might feature your story!
Thank you so much for reading! Stay Alert, Stay Informed, Stay Safe!
