Tax Scam: How Gift-Card Phishing Works

Laveta Brigham

You’d think that at a time when the country is deep in the throes of a recession and major health crisis, scammers would give things a rest. Not so. Countless people have already fallen victim to coronavirus-related scams, and this year, the IRS is urging taxpayers to avoid joining their […]

You’d think that at a time when the country is deep in the throes of a recession and major health crisis, scammers would give things a rest. Not so. Countless people have already fallen victim to coronavirus-related scams, and this year, the IRS is urging taxpayers to avoid joining their ranks.

There’s a new tax scam to watch out for

If you’ve ever owed money to the IRS, you’ve probably mailed in a check with your tax debt or arranged to have that money electronically withdrawn from your savings or checking account. But have you ever been inspired to send the IRS a gift card to cover a tax bill? Probably not.

Yet a new scam is circulating that involves asking taxpayers to cover a so-called unpaid tax debt with gift cards. And the IRS wants to make it abundantly clear that while gift cards make for a nice holiday gesture, they’re by no means an accepted payment option when it comes to an outstanding tax bill.

Man holding his head as he sits on a couch. A laptop rests on his lap.

Image source: Getty Images.

How the scam works

Here’s how the new gift-card tax scam might play out. Someone calls, emails, or sends you a text message out of the blue pretending to be an IRS or government agent. That person informs you that you’re on the hook for a tax penalty, either because of a problem with your return or because your name has been linked to criminal activity of some sort.

You’ll then be instructed to buy gift cards from various stores, after which point you’ll need to provide your caller, texter, or emailer with the specific numbers on those cards and their respective PINs. After all is said and done, your scammer gets access to gift cards, and you wind up out of money.

Don’t be a victim

It’s easy to think, “Wait a minute, I would never expect the IRS to demand payment in gift-card form. Who buys into these things?” But some of the scammers out there can be very convincing, and when you’re being threatened with fines and jail time, it’s all too easy to get caught up in the lie.

So how can you tell if you’re being scammed versus actually being contacted by the IRS? For one thing, the IRS will never ask for gift cards, period. In fact, it won’t even ask you to wire money. If you owe funds to the IRS, you’ll get a letter in the mail outlining your tax bill, and you’ll have the option to go directly to the IRS’s website and pay that debt there.

Furthermore, the IRS will neither call you threatening to send police officers to your door, nor threaten to take away your driver’s license. While the IRS can garnish your wages for a legitimate unpaid tax bill, it will also provide plenty of notice that it intends to go that route and give you an opportunity to work out a payment arrangement first.

What to do if a scammer reaches out to you

Even if you’re wise enough not to fall victim to the new gift-card scam or any other tax-related scam, make sure to report it so that law enforcement can investigate and perhaps stop those scammers in their tracks. You can use this online form to report a tax scam to the Treasury Inspector General for Tax Administration or call 1-800-366-4484.

You should also file a report with the Federal Trade Commission. While you may have better things to do with your day, your vigilance could spare someone else the horror of falling victim to a devastating tax scam.

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