Scam Alert: How to Know if IRS Demands for Taxes Owed Are Legitimate Or Scams

Imagine you’re sitting in your office or at home going about your daily business, and you get a phone call. The caller informs you that you owe the IRS money. They go on to explain that your tax payment for the year before was never received at all and that you must pay up now or face serious consequences. You might be threatened with a wage garnishment or even jail.

Unfortunately, this is a real scenario that unscrupulous scammers use to trick honest taxpayers into paying money they never owed in the first place.  As you may have already guessed, the caller isn’t really from the IRS. They’re just a petty thief attempting a cheap, but an all-too-common con.

Ending up in a tax dispute is incredibly stressful. Of course, this is the fear that these opportunistic scammers will prey upon to fraudulently get their hands on your hard-earned money. Learn more about what these scams look like, alarm bells to watch out for, and most importantly, how to protect yourself from becoming a victim.

Four Warning Signs and Ways to Determine if IRS Scam Threats Are Real

First of all, don’t panic if you receive a call or email purporting to be from the IRS. Even if the threat is real, panic is not a strategy. Instead, follow these four tips to protect yourself from thieves posing as IRS personnel.

Verify The Source of The Communication

Make a note of the number that called you. A simple Google search can reveal if the number is in any way related to the IRS. If you received an email, look at the full address. If it does not end in “” or at the very least, “.gov,” odds are good you are communicating with a scammer rather than a real representative of the IRS.

No matter what the caller says, you can simply hang up while you verify the origins of the call. You cannot be “punished” or forced to pay more money for hanging up on the caller, even if they really are with the Taxman.

Don’t Give in to Immediate Demands For Cash

While scammers will insist that you must pay past-due taxes immediately, our friends over at the real IRS will not. In a real tax dispute, you will receive a written demand for taxes owed in the mail.

Also, be aware that a real demand from the IRS will inform you of your rights in a tax dispute. Legitimate claims will always notify you of your right to appeal the amount in dispute. Even if you were found liable for taxes owed by the IRS, you would have options available to you such as payment plans.

Pay Attention to Payment Method Requests

Since the caller is demanding money, they will typically specify how it is to be paid. These requests can be clues that you are dealing with a charlatan.

One major warning sign is demand for payment in a particular format, such as with Western Union, money order, prepaid card, or even PayPal. Note that the real IRS will not even accept some of these forms of payment, nor would you be obligated to pay a large sum of money immediately over the phone or via an insecure email. Scammers will also play up the “urgency” of the situation in an effort to get you to reach for your wallet.

Demands for credit card payment are a dead give-away that the call is not related to a real tax dispute. Personnel from the IRS will never ask a taxpayer to give their debit or credit card information out over the phone. Even if you later find you do truly owe the IRS, there are plenty of other reasons to never pay your taxes with a credit card.

Watch Out For Outrageous Threats

Sometimes scammers will threaten to call the police or otherwise send law enforcement after you if you resist demands for payment. This is just another way to instill fear, cloud your judgment, and prevent you from assessing the situation rationally.

You cannot be arrested by state or local authorities for failure to pay taxes. Simply failing to file a  return or owing money to the IRS is not a crime, and therefore not a jailable offense. In theory, a person may be jailed for cheating on their taxes, but the IRS would have to prove that he or she did so deliberately. The burden of proof on the Government’s end is high, so even people who cheat on their taxes rarely end up seeing the inside of an 8x10 cell. Individuals who fail to pay the appropriate amount of taxes may be audited, have their wages garnished, or be subjected to a payment plan--but they will not be arrested.

What Can You Do About IRS Scams?

Even if you follow all of the above tips and find out that you really do owe money to the IRS, you still should not panic. There are several tools for fighting back if you end up in a legitimate tax dispute and even more for arranging payments.

If you do receive a call from a bogus tax collector, you can take action to help put the scammer out of business and spare future taxpayers from the types of calls or harassment you may have received.

First, you should consider reporting the scam attempt to the Treasury Inspector General for Tax Administration (TIGTA) online or by calling  1-800-366-4484. You may also file a complaint with the Federal Trade Commission. Mention in the complaint that you were contacted as part of an IRS Telephone Scam and include the details of the incident: dates, times, and any information that could help identify the scammer. Both of these authorities have the resources to notify the public about the details of these scams and pass on the information you have to the appropriate law enforcement agencies.

Bottom Line: Understand What IRS Scams Look Like to Avoid Becoming a Theft Victim

Now that you know these scams exist, you won’t become the next victim. That said, if you do have real concerns about paying your taxes, the best time to address them is before you file at all. Professionals like the experts at Royal Legal Solutions can help you with a variety of tax concerns. We routinely help investors set up structures that minimize their tax liabilities and work with CPAs who can assist you with other tax matters. Take our tax quiz and schedule a consultation to be proactive about your concerns and learn more about the services we can provide to help keep you on Uncle Sam’s good side.

Last Updated: 
December 4, 2018

Scott Royal Smith is an asset protection attorney and long-time real estate investor. He's on a mission to help fellow investors free their time, protect their assets, and create lasting wealth.

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