Taxpayers beware of largest IRS phone scam ever

Padgett Stratemann & Co.Thousands of U.S. taxpayers have fallen victim to the largest phone fraud scam – collectively paying over $1 million to scammers impersonating as IRS officials. “This is the largest scam of its kind we have ever seen and has hit nearly every state in the country,” reported Inspector General J. Russell George of the Treasury Inspector General for Tax Administration (TIGTA).

Prying on the fears of taxpayers during tax filing season, the scammers have developed a sophisticated phone scam.  TIGTA warns taxpayers to understand how the scam works and what should be regarded as a red flag the individual on the other end of the phone is not employed by the IRS.

This Is How It Works

  • Caller claims to be from the IRS
  • Victim is told they owe taxes and must make a payment using a prepaid debit card or wire transfer
  • Caller threatens victim they will be arrested, deported, or will lose their business or drivers license if they do not cooperate
  • Fake IRS emails are sent to support the scam
  • Scammers call a second time posing as the police or Department of Motor Vehicles (DMV)

The callers have a tendency to use common names and fake IRS badge numbers and in an effort to make the call seem official will provide the last four digits of the victim’s Social Security number.  In addition, they alter caller ID information so it displays as coming from the IRS, local police, or DMV.

Red Flags Are Waving
TIGTA stated that understanding how the scam works is the best way taxpayers can protect themselves.  Also, understanding how the IRS contacts taxpayers who do owe money is critical.   George explained that the IRS utilizes mail – not the phone – to make initial contact with a taxpayer.  He also went on to say the IRS does not ask for payment using a prepaid debit card or wire transfer, and the agency never accepts credit card information over the phone – nor does the agency request personal or financial information by email, texting, or social media.

What to Do If You Receive a Fraudulent Call or Email
Should you receive a call or email from a scammer, follow these steps to protect yourself:

  • If you owe taxes or think you owe taxes, hang-up the phone and call the IRS at 800.829.1040. IRS workers can assist with your questions.
  • If you don’t owe taxes, report the incident to TIGTA at 800.366.4484.  You can also file a complaint with the Federal Trade Commission at – add “IRS Telephone Scam” to the comments in your complaint.
  • Forward fraudulent emails to  NEVER click on links found in the email or open an attachment.

We hope you find this alert helpful in keeping you informed about the latest news affecting U.S. taxpayers.  For assistance with your tax needs or questions, contact your tax professional today at 210.828.6281 or 512.476.0717.

Kickbacks – under the table and under the radar


Authored by: Leo Munoz, CPA/CFF, CFE

In the fraud environment, kickbacks are classified as corruption schemes because they typically involve collusion between employees and vendors, where the fraudsters involved are either giving or receiving something of value to influence a business decision without the employer’s knowledge and consent.  In the public, we hear the cliché that an individual was receiving kickback payments “under the table.”  Kickback schemes often fly “under the radar” of management and can last years without detection, resulting in significant financial losses to victimized companies.

PS&Co kickbacks money pic

The classic kickback scheme involves an employee and vendor engaged in a collusive relationship for the purpose of diverting employer business to the vendor in exchange for cash payments or value-based arrangements to the employee.

Kickback schemes go undetected for a variety of reasons, including the following:

  • The employee involved is in a position of management and wields his or her influence to facilitate the scheme through the company’s normal accounting processes.
  • Some schemes involve multiple employees, which increases the opportunity to circumvent a company’s internal control procedures.
  • The company’s procurement policies allow for “sole-sourcing” or “limited number of vendor” bids at a specified dollar threshold, resulting in limited oversight.
  • The company’s procurement and payables processes lack detection-type internal control procedures to red-flag unusual activity on the back end of the process.
  • A company may lack a formal bidding policy, which results in an environment of undefined roles and responsibilities.
  • Business is diverted to vendors who are related in some form or fashion to the employee authorizing the business relationship; however, the relationship is unknown to the employer.
  • Services rendered by a vendor involved in a kickback relationship are services operationally needed by the victimized company and, therefore, do not raise questions with management.
  • Kickback cash payments or value-based arrangements (such as gifts, paid vacations, or free use of vacation homes) to the employee are typically not processed through a company’s accounting system.

Most kickback schemes are detected through tips from honest or disgruntled co-workers or vendors.  Therefore, if a company does not have a “fraud/whistleblower” hotline already in place, that would be a good start to initiate a process to detect kickback schemes.  However, while receiving a tip from a hotline helps, the tip, in most cases, comes after the scheme has been perpetrated for months or years.

In addition to having a whistleblower hotline, a company can initiate processes to detect possible red flags that may reveal signs a kickback scheme is active, such as:

  • Periodically review vendor transactions to spot a significant amount of activity with a few vendors; a year to year comparison may also reveal an unusual increase in transactions with vendors or situations where cost of materials or services is out of line.  Overbillings by vendors is a classic strategy deployed by vendors to fund their kickbacks.
  • If a company has a procurement policy that includes limited procedures for lower dollar thresholds, then place a periodic process to confirm vendors awarded work are legitimate “third party” vendors.  Simple background checks can confirm –
  1. Vendor ownership and valid Employee ID number
  2. Physical address and valid phone numbers
  3. Website presence

For limited bids with a limited number of bidders, review the vendors that were not awarded the work to determine if they are legitimate companies and not simply “shell” companies used to meet procurement policy requirements.

  • Perform a periodic database search that matches vendor addresses to employee addresses.
  • Create a robust vendor set-up process which compiles detailed vendor information and is reviewed and approved by someone either outside the procurement department or not involved in the collection of vendor data.
  • If not already part of a company’s procurement process, establish and enforce a written bid policy with detailed procedures and defined roles and responsibilities.

For companies who are intentional about addressing “bribery/kickback” risk within their organization, a formal “bribery/kickback” risk assessment can be performed with help from fraud expert consultants if needed, in order to identify areas that are susceptible to this type of fraud.

Morningside Ministries helping seniors take the next step

MM Main logoIt is hard to not be concerned with the amount of fraud and theft that is being suffered by our elders. According to the National Consumers League’s National Fraud Information Center, nearly a third of all telemarketing fraud victims are age 60 or older. Their strategies and tactics may differ, but these organizations are most interested in taking financial advantage of unsuspecting, trusting individuals.

Driven to better inform seniors, Morningside Ministries has partnered with authorities in the retirement industry from Elder Resource Group, Senior Living Choices, Generations Senior Moving & Transportation Services and Elder Law Attorney, Carol Bertsch. With their combined knowledge and experience, the stage is set for an exciting and informative session on the next step for seniors.

The event will take place on Saturday, August 24, 2013 between 10:00 – 11:00 a.m. at Morningside Ministries at The Manor – Kaulbach Assisted Living (602 Babcock rd., San Antonio, TX 78201). Please R.S.V.P. to Becky at (210) 731-1204 by August 22, 2013.

Many seniors are burdened with San Antonio homes they cannot sell due to a lack of expertise, time or resources. Speaker John Nelson, from Elder Resource Group will open our session by discussing an overview of the real-estate market and when it’s time to consider retirement living. Self proclaimed, “Realtors by trade – Transition Specialist by choice,” Elder Resource Group has a mission to make moving as easy & profitable for seniors as possible. Peggy Brown, a senior relocation specialist, will discuss tips on moving and how to become better organized for a move.

Kameron Chicoine will be joining us to discuss the processes in choosing the right retirement community. Chicoine owns and operates Senior Living Choices, a comprehensive retirement locating guide, serving the Texas Hill Country and Central Texas has been serving the area for over 13 years. Elder Law Attorney, Carol Bertch will be closing the afternoon session with a conversation about directives on elder and disability law. Her firm focuses on elder and disability law, providing an umbrella of services to advise and counsel seniors and their families so that they can make informed decisions to achieve their desired outcome. Bertch follows her goal to assist seniors in finding positive solutions to complex challenges so they can maintain dignity, control and, most of all, peace of mind.

About Morningside Ministries
Morningside Ministries is San Antonio’s oldest and largest not-for profit, faith-based, senior care organization dedicated with the specific mission of “Caring for Those Who Cared for Us.” Morningside Ministries has served the San Antonio community since 1961 with Morningside Ministries at the Meadows, Morningside Ministries at The Manor and Morningside Ministries at Chandler Estate. In May of 2004, Morningside Ministries extended the ministry to include Morningside Ministries at Menger Springs in Boerne. Today we continue to serve over 800 residents in retirement, assisted living, nursing and memory care and a senior community center.