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Multimillion-dollar fraud bust highlights tax scam you should watch out for

Key Points
  • The Justice Department recently announced the bust of a tax scheme that operated in India and the U.S. 
  • The scam, whereby U.S. residents received calls from individuals claiming to be employees of the IRS or U.S. Citizenship and Immigration Services, is a common tactic used to defraud unwitting individuals.
  • If you get a similar call, do not divulge any personal information or money.

The recent bust of a large fraud and money laundering conspiracy highlights one key takeaway for you: Be wary of who is on the other end of your phone line — particularly if they claim to be the IRS.

The Department of Justice announced that 24 defendants have been sentenced in connection with a multimillion dollar fraud scheme in what Attorney General Jeff Sessions called the "first-ever large scale, multi-jurisdiction prosecution targeting the India call-center scam industry."

Laflor | Getty Images

Twenty-two of the defendants were ordered to pay $8.97 million in restitution to the victims as part of the punishment for their crimes. Twenty-one of the defendants must also pay more than $72.9 million in judgments. A total of 56 individuals, as well as five companies in India, have been charged in connection with the scheme.

The alleged perpetrators operated their scam from 2012 to 2016, whereby they would call U.S. residents and claim to be the IRS or U.S. Citizenship and Immigration Services.

They would then demand money be wired to them or paid via stored value cards. They would threaten the victims with arrest, imprisonment, deportation or fines if they did not comply.

A website has been created to provide more information about the case and it includes a form for potential victims of the scheme to fill out.

Once individuals provide evidence of their losses – including receipts and cards purchased – the claims will be evaluated to determine if they are victims entitled to restitution, a Justice Department spokeswoman said.

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The restitution order may be changed up to 60 days after sentencing, which is Sept. 14, according to the spokeswoman.

The scam is one of the IRS' "dirty dozen " tax scams to watch out for, and all are prevalent year-round, not just during tax time, said Susan Allen, senior manager for tax practice and ethics for the American Institute of CPAs.

"These scammers are sophisticated and they're good — good in all the wrong ways," Allen said. "They're good at what they do."

Allen said she has had the call happen to her personally, and even she was caught off guard.

That is because the scammers will say something to get your attention — that you owe money, there's a warrant for your arrest and someone is coming to your house.

"They can kind of lure you in," Allen said.

It could be you really do owe money, but it won't be by putting it on an iTunes gift card. There are secure ways to pay the IRS.
Jackie Perlman
principal tax research analyst at The Tax Institute at H&R Block

If you get a call from someone claiming to be the IRS, you need to remember to pause and think, Allen said.

"The first time you hear from the IRS it's never going to be a phone call," Allen said. "You would have received countless notice streams. It's a very formalized process."

The IRS will typically initiate contact through what is called a CP2000 notice. That notice informs you that the IRS has information that does not match your tax return. There is a formal process for individuals to respond. Once payment is required, there likewise a process for that, as well, noted Jackie Perlman, principal tax research analyst at The Tax Institute at H&R Block.

"It could be you really do owe money, but it won't be by putting it on an iTunes gift card," Perlman said. "There are secure ways to pay the IRS."

Also remember that, while a caller may seem to have personal information on you, they may have obtained that information in an invalid way, such as through a data breach.

"These people are going to continue to try to do what they do," Perlman said. "The best thing for the public to do is be aware of it and take precautions."

If you believe you have been the victim of a similar scam, call the Treasury Inspector General for Tax Administration at 1-800-366-4484 or via its website. You may also file a complaint with the Federal Trade Commission.