Scam victims pay 'back taxes' with iTunes gift cards

Tax season is one of the busiest times of the year for scammers.

Let's face it: Filing your income tax is time-consuming and confusing, and scammers play off of the uncertainty that comes along with it. And since no one wants to get on the bad side of the Internal Revenue Service, when you get a call from the "IRS" and they talk about "fraud," "police," "back taxes" and "arrests," it tends to get your attention. It's that fear that drives the tax-season scammers.

With that said, there are a string of phone scams taking place, asking people to make payments for things such as taxes, hospital bills, bail money, debt collection and utility bills. The scams are committed using many methods, including gift cards. The gift cards of choice, however, are iTunes gift cards.

Apparently, everyone loves those Apple gift cards — even scammers.

Getty Images
iTunes song gift cards are seen on display at a Best Buy store in San Francisco.

You might find it bizarre that people are actually falling for the scam. Well, don't be. Taxpayers are taking the bait and losing significant amounts of money, according to the Treasury Inspector General for Tax Administration.

The Treasury Department reports that more than 10,000 victims have collectively paid in excess of $54 million as a result of tax phone scams since October 2013. Again, it may seem crazy, but the scams have been so successful that the Treasury Department was forced to issue a scam alert: "Any caller requesting taxpayers place funds on an iTunes gift cards or other prepaid cards to pay taxes or fees is an indicator or fraudulent activity," it reads.

Regardless of the reason for payment, the scam follows a precise formula: The victim receives a threatening call urging him or her to make a tax payment by purchasing iTunes gift cards from the nearest retailer. After the cards have been purchased, the victim is asked to pay by sharing the 16-digit code on the back of the card with the caller over the phone. Sending money through iTunes gift cards is like a wire transfer.

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It's difficult to track where the cash goes after the gift card is drained. If you find out later you've been scammed for money, the chances that you'll get the money back that was on the card are slim.

I played along with the IRS phone scammer who recently called me for as long as I could. However, there was no way I was able to contain my laughter when he instructed me to pay my "back taxes" by purchasing an iTunes gift card. I did "offer" to pay with my credit card, but the scammer said it was too late for that. I was instructed to immediately buy an iTunes gift card and to stay on the phone the entire time; otherwise, "this final chance to avoid prison will disappear and the police will soon arrive and arrest" me.

Since I didn't comply, the "IRS" apparently issued an arrest warrant "on my name."

This was the ominous message left on my answering machine:

"Hello, this call is an official note from IRS, the Internal Revenue Service. The reason of this call is to inform you that IRS is filling [sic] a lawsuit on your name because you have tried to do a fraud with the IRS and we are taking illegal [sic] action and we are issuing a legal arrest warrant on your name. To get more information regarding this case file, just call us back on our department number, 708-432-8161."

I called the number and started going through a menu of options and was actually transferred to a call center where a man began discussing my "case file" so he could help me avoid a lien being placed on my assets. I asked whom I was speaking with and also pointed out he had no idea whom he was talking to, because he never even asked my name — so how could he possibly know my "case file"?

Without hesitation, he asked me to give him my Social Security number so we could verify it with the one in my "case file." I questioned how the IRS can demand that I pay taxes without giving me the opportunity to question or appeal the amount they say that I owe. I then asked him for his name and his IRS identification number. I was disconnected.

I contacted the IRS about the unsolicited call from the scammer who left the threatening message. The IRS representative said that, despite warnings, people still readily give out personal data and fall into the traps of these scammers. And they indeed use iTunes gift cards to pay their back taxes.

So while it may seem obvious, here goes: Never, ever give out personal financial information — such as Social Security numbers or credit card and bank account numbers and passwords — to anyone who calls you, claiming to be from the IRS.

The IRS reminds taxpayers that IRS impersonation scams continue year-round and that they tend to peak when scammers find prime opportunities to strike. These scammers will be aggressive and use threatening phone calls while impersonating IRS agents, and the scams remain a major threat to taxpayers.

Here are some things scammers, but never the IRS, often do. Any one of these four things is a telltale sign of a scam:

  • Call to demand immediate payment using a specific payment method, such as a prepaid debit card, gift card or wire transfer. Generally, the IRS will first mail a bill to any taxpayer who owes taxes.
  • Threaten to immediately bring in local police or other law-enforcement groups to have the taxpayer arrested for not paying.
  • Demand that taxes be paid without giving the taxpayer the opportunity to question or appeal the amount owed.
  • Ask for credit or debit card numbers over the phone.

For more information on reporting tax scams, go to IRS.gov and type "scam" in the search box.

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