By Michael Williford, Spring 2016 Student Intern
More recently, FINRA, the organization that regulates financial industry professionals, has issued an investor alert reminding investors that frauds can still be perpetrated on unwary investors the old fashioned way—over the phone. Specifically, the alert focuses on an IRS impersonation scam with which you may already be familiar. The scammers claim to be from the IRS. They sound official and use high pressure tactics like the threat of arrest or driver’s license revocation to persuade a victim to fork over his hard earned money to pay a tax bill immediately, despite the fact the victim owes no delinquent taxes.
Psychologists and behavioral economists explain that scammers use these tactics to build what they refer to as “source credibility” to influence a victim to lower his guard because he believes the scammer when he says he is from a reputable agency. In the case of the IRS scam it often involves using fake badge numbers, “spoofing” the IRS toll-free number on your caller ID, along with fake emails designed to soften up the victim so that when the scammer calls, the victim may already be expecting to hear from the IRS about a tax bill.
This trend is part of a larger effort by scammers to prey on senior citizens. Although FINRA and other governmental organizations are attempting to combat the exploitation of elderly investors, the FBI and organizations dedicated to protecting seniors say the best defense is to be familiar with the latest scams, and to very be skeptical of anyone who phones you demanding immediate payment via a wire transfer or prepaid debit card.
Regarding the IRS, it is important to remember the IRS will never demand money over the telephone, and all tax matters are handled by the IRS through the mail via a written notification. Taxpayers always have the right to officially challenge a tax bill they believe is in error.
Stay safe and protect your nest egg from would be IRS impersonators. Investigate all claims of delinquent tax bills, and don’t be afraid to ask questions of the IRS before you transfer money to anyone over a tax bill. You can figure out how to contact your local IRS office with questions here.