IRS: Tax scam brings many unhappy returns

Con artist "tax pre­parers" are telling seni­ors they can get big re­funds. What they're likely to get is a lot of ag­grav­a­tion.

Some people are nev­er old enough to know bet­ter; con artists love them.

The In­tern­al Rev­en­ue Ser­vice is try­ing to put a stop to a scam that tar­gets seni­or cit­izens or pub­lic as­sist­ance re­cip­i­ents by per­suad­ing them to file false tax re­turns with prom­ises of gen­er­ous re­funds.

Nor­mally, seni­or cit­izens who re­ceive So­cial Se­cur­ity be­ne­fits aren’t re­quired to file tax re­turns any­way, said IRS spokes­man Dav­id Stew­art, but the con artists con­vince their eld­erly vic­tims that, for $50 to $100 fees, they can squeeze a thou­sand bucks or more out of the IRS by fil­ing tax re­turns.

In­stead, what a vic­tim really gets is sort of a four-fingered poke in the eye.

First, the vic­tim is out the money he paid for the phony re­turn.

Then, be­cause a re­turn must list in­come to gen­er­ate a re­fund, the IRS will in­form the So­cial Se­cur­ity Ad­min­is­tra­tion. That might af­fect the vic­tim’s be­ne­fits. Ditto for pub­lic as­sist­ance re­cip­i­ents. There are in­come thresholds that pub­lic as­sist­ance and food stamp be­ne­fits are based on. If it is dis­covered the re­cip­i­ents have in­comes that sur­pass those lim­its, they might see be­ne­fits changed.

Third, in what Stew­art called the rare in­stances in which re­fund checks are cut, the vic­tims be­come re­spons­ible for re­pay­ing the IRS when they’re found out.

Fourth, the vic­tim sets him­self up for iden­tity theft be­cause he has giv­en the phony tax pre­parer his So­cial Se­cur­ity num­ber, ad­dress and oth­er per­son­al fin­an­cial in­form­a­tion. Iden­tity theft can be more than a lot of trouble; it can be ru­in­ous to a per­son’s cred­it rat­ing and even­tu­ally fin­an­cially dev­ast­at­ing.

And those who were hood­winked might have really be­lieved they were en­titled to the cash the phony tax pre­parers said they could get them.

“I think the vast ma­jor­ity don’t have any idea they are fil­ing fraud­u­lent re­turns,” said Spe­cial Agent Shauna Frye, spokes­wo­man for IRS Crim­in­al In­vest­ig­a­tions in Phil­adelphia.

But they find out quickly, Frye said, adding that some people are no­ti­fied their re­turns are bad in three months or less. They come in­to the IRS seek­ing ex­plan­a­tions for those no­tices. That’s when they learn they’ve been scammed; it’s also when the IRS finds out the con has hit a cer­tain area.

It’s pretty much all gravy for the grift­ers.

They come off as very pro­fes­sion­al, Stew­art said. They in­vest a little cash in busi­ness cards and very slick-look­ing posters. They ad­vert­ise and dis­trib­ute fli­ers. And they use church and com­munity groups as well as or­gan­iz­a­tions that as­sist seni­ors to smooth their paths to suck­ers.

On the fli­ers they dis­trib­ute, the con men sug­gest they can get juicy re­funds with little or no doc­u­ment­a­tion.  And they let oth­ers spread the word for them.

Even­tu­ally, the vic­tims’ re­fund claims are re­jec­ted or those re­funds are only slightly lar­ger than the amounts they paid for the con artists’ “help.” By then, the phony tax pre­parers and the money they re­ceived are long gone.  

This dodge has been traipsing around the coun­try after be­gin­ning this year in the Mid­w­est, Stew­art said. It was first no­ticed in Pennsylvania in late June and early Ju­ly, said Frye, when phony tax pre­parers used their vic­tims’ faith in their own church pas­tor to per­pet­rate this con.

They ap­proached an Erie, Pa., pas­tor and told him some eld­erly mem­bers of his con­greg­a­tion might be eli­gible for “stim­u­lus money,” Frye said in an in­ter­view on Aug. 11. The pas­tor al­lowed them to set up shop at his church, and the con artists ac­tu­ally pre­pared pa­per re­turns for their vic­tims, char­ging them about $75 each, Frye said.

In just a few minutes, though, the vic­tims had been duped in­to giv­ing out a lot of per­son­al in­form­a­tion and were set up to be fur­ther vic­tim­ized. Cred­it cards could be es­tab­lished in their names, Frye said, and the con men might ac­tu­ally pay the cred­it card bills for a while so that cred­it lim­its would be raised and then max out the cards. It could be years be­fore the vic­tims find out their cred­it stand­ings have been ruined, Frye said.

Frye stressed that it isn’t just seni­or cit­izens that are be­ing vic­tim­ized. Con men are us­ing the ma­gic words “stim­u­lus money” and their know­ledge of en­ti­tle­ment pro­grams to prey on people with low in­comes or people on pub­lic as­sist­ance who might nev­er have filed tax re­turns.

This as­pect of the scheme is more com­plic­ated, but the pay­offs are sweeter for the con artists — per­haps $5,000 or more per fraud­u­lent re­turn.

Some people are eli­gible for the fed­er­al earned in­come cred­it that tops off at about $5,600, Frye said. An eli­gible per­son is the single head of a house­hold with two chil­dren who makes $8,000 to $20,000 a year.

What the phony tax pre­parer does is tell a pub­lic as­sist­ance re­cip­i­ent that he is eli­gible for $1,000 or $1,500 in fed­er­al stim­u­lus money if he just files a re­turn. The con man of­fers to front the vic­tim the money, takes the vic­tim’s per­son­al in­form­a­tion and files a re­turn elec­tron­ic­ally in which he man­u­fac­tures an in­come struc­tured to gen­er­ate the max­im­um pay­out. He has that money paid dir­ectly to an ac­count he has set up. When the fed­er­al dol­lars are de­pos­ited, the con artist emp­ties the ac­count and van­ishes.

Mul­tiply that $3,000 or $4,000 profit by the amount of vic­tims one con man can col­lect in just a few weeks, and it’s easy to es­tim­ate how much money he can ac­cu­mu­late.

The IRS, however, mon­it­ors claims for earned in­come cred­its, and the vic­tims start get­ting no­tices that they have to re­pay three, four or five times what the phony tax pre­parers gave them.

Again, Frye said, the vic­tims come in­to the nearest IRS of­fices, say­ing, “I don’t know what this is all about.”

So far, the scam hasn’t turned up in Phil­adelphia, Frye said, but its ar­rival is ex­pec­ted.

Frye said the IRS is try­ing to warn people that there is no free money. Don’t give out any per­son­al in­form­a­tion to any­one you don’t really know and don’t sign any­thing you haven’t fully read.

Any­one vic­tim­ized or even ap­proached by any­one pro­mot­ing phony tax re­turns should call Frye at 215-861-1104.

For oth­er IRS ques­tions, vis­it or call the IRS toll-free at 1-800-829-1040. ••

Re­port­er John Loftus can be reached at 215-354-3110 or 

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