Plus, what to do if you legitimately owe the IRS.

Not long ago, a close friend showed up at my home with a worried look on her face. When I asked what was wrong, she told me that she had just had a very disturbing conversation with a man who said that he was with the IRS. The man had told her that if she did not pay $2,000 to the IRS right away, she would be arrested immediately. “I don’t owe the IRS a penny,” my friend told me. “I always pay my taxes on time. But who knows, maybe I do owe the agency money. I don’t know what to do because I don’t want to get arrested!”

I told my friend not to worry and that the caller was an IRS phone scammer. I went on to explain that individuals posing as IRS agents were calling people and scaring them into paying them money and/or sharing their personal and financial information by threating them with a dire consequence if they didn’t, like arrest, license revocation or deportation. My friend breathed a big sigh of relief.

Unfortunately, many consumers have fallen for the threats of these scammers. In fact, a story on NPR stated that between 2013 and April 2016 alone, unsuspecting consumers had been duped out of a whopping $26.5 million by people posing as IRS representatives.

How to recognize an IRS phone scam

If someone calls you claiming to be with the IRS and wants to talk about your IRS tax debt, here are four things to remember that will help you avoid being duped:

  1. The IRS always puts things in writing. In other words, if in fact you owe back taxes, it will not demand payment over the phone; it will send you a letter asking you to pay your debt. And if you don’t believe you owe the money, it will give you an opportunity to appeal.
  2. The IRS will not require that you pay your tax debt in a certain way – with a prepaid debit card, for example.
  3. The agency will never ask you to provide your bank account number or the number on your credit or debit card over the phone.
  4. And, it won’t threaten you with immediate arrest, license revocation or deportation if you don’t pay the money it says you owe right away. If you are behind on your taxes and don’t work out a way with the IRS to pay them, the agency will take steps to collect what you owe. However, it will let you know what it’s about to do in writing and will give you an opportunity to respond.

What to do if an IRS scammer calls you

If you receive a call from someone you believe is an IRS scammer, your best option is to simply hang up. But if you do decide to engage in a conversation with the caller, don’t provide him or her with any information about your finances or with your social security number, and end the call quickly.

You should also:

• Report what happened to the Treasury Inspector General for Tax Administration. File your report here.
• Let the Federal Trade Commission (FTC) know about the incident. Here’s the link for doing that.

Your options if you owe the IRS back taxes

If you owe money to the IRS, don’t ignore the debt. Not only will the amount that you owe increase because of interest that compounds daily and monthly penalties, but also the IRS has powerful collection tools, which it will use against you eventually.

If you can’t pay what you owe in a lump sum, you have options. For example, you may be able to work out a monthly installment plan with the IRS — apply here, https://www.irs.gov/individuals/online-payment-agreement-application. Or, you may be eligible to settle your debt for less than you actually owe on it through an Offer in Compromise. Go here to learn how this payment option works and to find out if you are eligible for it, https://www.irs.gov/individuals/offer-in-compromise-1.

Also, if you can prove to the IRS that your financial situation is so dire that you cannot pay anything on your tax debt right now, you can ask that the debt be classified as “currently not collectible.” If it agrees to do that, the IRS will put its collection actions on hold although interest and penalties will accrue. And when your financial situation improves, the IRS will expect you to pay what you owe.

If you ignore your tax debt, the IRS may:

• File a federal tax lien against property you own – your home for example. You won’t be able to get the lien released until you’ve paid everything you owe to the IRS.
• Seize (levy) your assets, like your wages, bank accounts, social security benefits, and retirement income. The IRS will apply that income to your tax debt
• Seize and sell other assets, like your car, boat or real estate. The IRS will use the sales proceeds to pay down your debt.

Mary Reed is the coauthor, with credit expert Gerri Detweiler, of Debt Collection Answers: How to Use Debt Collection Laws to Protect Your Rights, a free e-book available on Amazon and at DebtCollectionAnswers.com. She has written 22 books on personal finance and consumer law.

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Article last modified on March 3, 2017. Published by Debt.com, LLC .