If you ask a US citizen what they are most afraid of in getting in their mail most will answer “a letter from the Internal Revenue Service”. And with good reason. The average person has little to no knowledge of the Internal Revenue Code and relies on publications, magazine articles and their software for tax advice. And the Internal Revenue Code likes to perpetuate that image. Thieves have now taken advantage of this fear steal your identity. This could come in the form of a threatening phone call, an e-mail to your personal address demanding that you complete a Form that requests all your personal information or a fax to an office demanding that you complete an attached Form.

The following was sent to all NJ CPAs by the NJ Society of CPAs.

IRS Phone Scam

A scammer who organised a scheme in which taxpayers were threatened with calls purporting to come from the Internal Revenue Service and the FBI demanding payment has been sentenced to 14 years in prison.

Sahil Patel was sentenced to 175 months in prison and $1 million in forfeiture for his role in organising the US side of a massive fraud and extortion ring run through various “call centres” located in India, through which Patel and his co-conspirators impersonated American law enforcement officials and threatened victims with arrest and financial penalties unless those victims made payments to avoid purported charges.

In addition to the prison sentence, Patel, 36, of Tatamy, Pennsylvania, was sentenced to three years of supervised release.

Patel pleaded guilty in January 2015 before US District Judge Alvin Hellerstein. “The nature of this crime robbed people of their identities and their money in a way that causes people to feel they have been almost destroyed,” said Hellerstein.

According to prosecutors, from December 2011 through the day of his arrest on December 18, 2013, Patel participated as a leader in a sophisticated scheme to intimidate and defraud hundreds of innocent victims of hundreds of dollars apiece. Throughout the course of the fraud, telephone call centres located in India hired English-speaking employees to place telephone calls to individuals living in the US.

Armed with long lists of potential victims, referred to by Patel and his co-conspirators as “lead sheets”, those India-based callers systematically placed thousands of calls to individuals in the US in the hopes of intimidating the call recipients into providing a payment to the co-conspirators. To extort these victims, the India-based callers impersonated law enforcement officials of the FBI and IRS and threatened their victims with financial penalties and arrest in connection with fabricated financial crimes.

“Sahil Patel’s elaborate scheme involved impersonating law enforcement officers and using intimidation and fear to bilk over a million dollars from hundreds of unsuspecting victims,” said Manhattan US Attorney Preet Bharara in a statement.

In order to receive funds in a manner that would mask the identity of Patel and his co-conspirators, the ring undertook several measures to anonymise itself, including by using anonymised voice-over-internet technology, which was subscribed under fraudulent names in order to give the appearance of being related to US law enforcement agencies.

Patel and his co-conspirators also used several layers of wire transactions in order to conceal the destination and nature of the extorted payments, which totalled at least $1.2 million.

The scam has been continuing and on the rise this year despite Patel’s arrest. Taxpayers who have been targeted by the scam can report the incident to the Treasury Inspector General for Tax Administration at www.tigta.gov and clicking on the IRS Impersonation Scam Reporting tab in the upper right corner, or call the TIGTA hotline at 1-800-366-4484.

Comment

We have had a few clients receive these calls that they described as “terrifying”. The IRS will not contact you by phone, fax or e-mail. If you get such a call, hang up and call the IRS. Other client’s whose voice mail answered the call called back and after the harangue, started asking questions such as why are taxes due; I did not work last year? The person at the opposite end just kept reading off a script and eventually hung up.

Other scams of which we are aware is where a fax is sent to your office with a cover page with no name and a fake Form W-8BEN attached. Whoever is at the fax machine reads the fax and brings it to the nearest American stating: “This must be for you”. E-mails to your personal e-mail address are as much of a concern as a phone call. Client’s ask, how did they get my personal e-mail address, how do they know my full name and address, etc. Do not respond, just forward the message to the IRS.

Pursuant to the requirements relating to practice before the Internal Revenue Service, any tax advice in this communication is not intended to be used, and cannot be used, for the purpose of (i) avoiding penalties imposed under the United States Internal Revenue Code, or (ii) promoting, marketing or recommending to another person any tax related manner.

The tax advice given by this column is, by necessity, general in nature. You should, of course, check with your own US tax consultant as to how specific transactions affect you since tax advice varies with individual circumstances.

James Paul Sabo, CPA, is the president of ETS Ltd., PO Box HM 1574, Hamilton HM GX, Bermuda. Questions should be sent to: jsabo@expatriatetaxservices.com