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CPAs can help curb costly IRS impersonation scams.

CPAs should make certain their clients, employers and associates are aware of the growing threat of swindles engineered by criminals posing as Internal Revenue Service employees. These impersonators use false IRS identities to gain access to confidential financial information, which is used to defraud the individual.

Fast-growing swindle

The IRS Internal Security Division investigated 157 impersonation cases during the first six months of 1992--an increase over 167 cases in 1991 and 140 cases in 1990. And reported cases may represent only the tip of the iceberg. The IRS believes many of these scams go unreported because the victims are too embarrassed to talk to the IRS Internal Security Division or other authorities. Other victims wait too long to call authorities, allowing the impersonators to escape.

How the scams weds

Agent impersonators typically use one of three schemes, illustrated by the following actual cases:

* On the West Coast, a woman identified herself to Mexican workers as an IRS employee. She advised the workers they owed back taxes. She promised to return with federal refund checks the next day if the taxes were paid immediately; however, the woman threatened to come back the next day with a sheriff to arrest them if they did not comply. The workers paid the money she demanded. Of course, the woman never returned with refund checks.

This impersonator was eventually indicted on nine counts of false personation and extortion. She pleaded guilty and is currently awaiting sentencing.

* An impersonator in a midwestern city called taxpayers and identified himself as an IRS agent conducting audits of their tax returns. During the calls, he obtained information on taxpayer credit cards, bank accounts and Social Security numbers.

With this information in hand, the impersonator contacted the victims' credit card companies, requesting replacement cards to be issued in the victims' names and mailed to false addresses. Also, the impersonator's accomplice, using financial information obtained by the impersonator, stole $850 from one victim's bank account.

IRS and U.S. postal inspectors arrested the impersonator and his accomplice as they attempted to pick up fraudulently obtained credit cards. The impersonator was indicted on five counts of false personation, obstruction of mail and false statements. The accomplice was charged with theft by deception. Both pleaded guilty and are awaiting sentencing.

* In a wide-ranging scheme that gave rise to complaints from tax-payers in Alabama, California, Florida, Georgia, Illinois and Ohio, impersonators called taxpayers and informed them they had won a large, well-known cash sweepstakes. They were told to wire money to an alleged IRS official to pay federal taxes on the winnings and were told the winnings check would be mailed to them when the taxes were received. Naturally, the impersonators kept the "tax" money and no checks were ever sent out.

Eight impersonators were convicted on conspiracy and wire fraud charges. They were sentenced to a combined 307 months in prison and 1,700 hours of community service. They were also ordered to pay over $22,000 in fines and restitution.

What CPAs can do

CPAs should have clients, employers and associates follow a few simple rules to protect themselves from IRS employee impersonators. They should

* Be wary of an unexpected phone call from the IRS asking for money for back taxes. Steven McConville, chief, management branch of the IRS Internal Security Division, Washington, D.C., says IRS procedures require at least three written notices to a taxpayer before a phone call is made. Therefore, unless these notices have been received, the "IRS employee" making the phone call to the taxpayer is probably phony.

McConville says the best way to investigate such calls is to telephone the nearest IRS office and verify the caller is employed there and is working on the taxpayer case. If the caller appears to be an impersonator, the taxpayer should ask to be put in touch with the nearest IRS Internal Security Office or call the IRS inspection hotline at (800) 366-4484.

* Be suspicious of people who visit their homes claiming to be IRS employees. The only time IRS agents make personal visits in order to collect back taxes is after lengthy procedures or during criminal investigations. The taxpayer should always check credentials carefully and call the local IRS office to verify employment and assignment. McConville suggests a taxpayer try to set up a later appointment if he or she suspects a scam. That way, the IRS can arrange to have one of its agents present when the suspected impersonator shows up.

* Never give out financial information over the telephone. McConville says the IRS will ask to confirm over the telephone only data previously given in a personal meeting. Even then, the taxpayer could refuse to give the information, and the IRS would not pursue the matter further but would instead seek to set up another appointment with the taxpayer.

Set up a seminar

CPAs also can inform clients and business associates about IRS impersonation schemes by setting up seminars on the subject. IRS employees are available to speak about typical schemes, proper identification of IRS officials and how taxpayers can protect themselves against impersonation schemes. For further information on obtaining an IRS speaker, call (800) 829-1040 or a local IRS office.
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Publication:Journal of Accountancy
Date:Oct 1, 1992
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