The IRS and taxpayers will be severely tested in the coming months by an onslaught of coronavirus- and CARES Act-related scams and frauds, consumer watchdogs told Tax Notes.
“We’re already seeing all kinds of coronavirus-related scams, and the situation is ripe for more,” said Susan Grant of the Consumer Federation of America.
With $2 trillion of stimulus money from the Coronavirus Aid, Relief, and Economic Security Act (P.L. 116-136) — not to mention tens of billions of dollars in anticipated tax refunds — flowing to Americans at unprecedented speed through the IRS, “it’s open season for con artists,” Grant said.
After Senate Finance Committee Chair Chuck Grassley, R-Iowa, called April 6 for the Treasury Inspector General for Tax Administration to provide more coronavirus fraud education, TIGTA released a bulletin the next day urging taxpayers to be on “high alert” against relief payment rip-offs.
Also hoping to limit communication channels available to fraudsters, the Federal Trade Commission and Federal Communications Commission sent a joint letter April 3 warning three voice over internet protocol providers that routing coronavirus-related scam calls is illegal, Grant noted.
Coronavirus scammers are using phishing phone calls and emails to persuade taxpayers they are from the IRS, seeking personal and financial information purportedly to deliver stimulus money, Grant and others said. Advance refund loan scams are also a popular means to fraudulently “sign up” individuals for stimulus payments, Grant said. Phony loan offers, fake government grants, and other scams promise financial help to desperate people but steal their identities and money instead, she said.
No one knows how many of these swindles are being propagated, and that’s part of the problem, said Eva Velasquez of the Identity Theft Resource Center. TIGTA recommends scam victims report their experience to the inspector general, she said, but the FTC, FCC, FBI, and myriad state and local law enforcement agencies also keep their own records, without sufficient data sharing or analysis.
The federal government needs centralized reporting on coronavirus-related scams so that law enforcement can detect patterns and try to get ahead of the coronavirus fraud problem, Velasquez said.
Put Down the Phone
Enrolled agent Phyllis Jo Kubey said clients of her New York City-based practice haven’t complained about coronavirus tax scams yet, but she said she posts almost every day on social media warnings like that from TIGTA or advice not to talk with fraudsters offering speedier stimulus money.
Kubey said one big concern is the proposed Treasury portal to update personal banking and direct-deposit information with the IRS. “That would be a really ripe target for scammers,” she said.
The prospect of mailing paper checks to millions of unbanked individuals also opens a new avenue for fraud, Kubey said.
“A large number of people in times of great anxiety like this compulsively pick up the phone,” Kubey said. “People need to feel they’re doing something,” and whether calling a bank about a Paycheck Protection Program loan or answering a fraudster’s phone call, “they are picking up the phone more,” she said.
A paper check mailing program will also stretch IRS resources, Kubey said. Most of the workforce is on stay-at-home or teleworking status, or idled, she noted. “I don’t know what will happen if there’s another massive mailing operation at the IRS,” she said.
Just Like a Virus
While there are increasing numbers of tax- and stimulus-related scams, Grant said, “If you think about it, there are just a handful of old scams . . . and there can be an innumerable variety of those.”
For example, VoIP providers allow scammers to reach American taxpayers from overseas, but the call and the approach are much the same as before VoIP was available, she said.
Scammers are opportunists, the consumer advocates agreed. “It’s interesting to watch how the scams follow developments in the news,” Grant said. Velasquez said that in the coronavirus relief process, “the scammers are going to leverage an unfamiliar process and that fear of missing out” by posing as “insert name of trusted entity here, and then tie up [the taxpayer’s] relief check.”
Both advocates were cautiously optimistic about the IRS’s ability to administer coronavirus financial relief while protecting taxpayers from criminals.
“Over the years, since the IRS has gone to e-filing, they kind of left the door open for” stolen identity refund fraud, Velasquez said. “But they have been steadily pushing that door closed over the years, and I think they’ve done a very good job” against identity and refund theft, she said.
Grant said, “You can’t expect an agency that has so severely been cut in terms of number of personnel and other resources to be able to mobilize as quickly as we’d like, to be able to handle this huge job, to be able to respond to inquiries that consumers may have. . . . This will put more strain on an overtaxed agency — forgive the pun.”
And whatever the IRS does to fight identity thieves and fraudsters, Grant said, “they’ll continue to mutate, just as a virus can.”