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Electronic Federal Tax Payment System (EFTPS) Scam


For many years fraudsters have been trying to take advantage of taxpayers’ fear of the Internal Revenue Service (IRS) to scam information and money out of them. In the latest phone scam reported by the IRS, the fraud is being tied to the use of the EFTPS (Electronic Federal Tax Payment) system.

Many taxpayers use the EFTPS system to make various tax payments including payroll taxes, 1040 estimated payments or payment plan payments which makes this latest scam all the more worrisome. In this scam, the fraudster contacts a taxpayer claiming to be an IRS agent and indicating that there have been multiple certified letters sent to the taxpayer, all of which have been returned to the IRS. The fraudster then threatens the taxpayer with arrest unless a payment is made immediately using a prepaid debit card. The fraudster also tells the taxpayer that the card is linked directly to the EFTPS system, which is not true – in reality the fraudster retains control of the card. Lastly, the fraudster instructs the taxpayer not to contact their tax preparer, an attorney or their local IRS office until after the payment is made.

This type of fraud scam, while a new twist on an old concept, can be more dangerous than many of the other scams. The EFTPS system is widely used by small businesses to remit payroll taxes in the normal course of business, so the story comes across as more believable than when a fraudster calls a taxpayer to say there is a balance due to the IRS, when a liability is known not to exist.

Please remember, the IRS will NEVER call a taxpayer directly to discuss problems with their tax payments, they will NEVER insist on immediate online payment, and they will NEVER call and ask for personal identifying information or bank information over the phone. The IRS will send multiple letters regarding a tax matter before taking any additional steps to contact a taxpayer. Upon receipt of correspondence, a taxpayer should enlist the services of an accountant or attorney to represent them using Form 2848 Power of Attorney, if they do not feel comfortable working directly with the IRS.

If you receive a call from “the IRS”, please hang up. If there is really a matter that requires your attention, the IRS will send you a letter which you will be able to review and discuss with your tax preparer or attorney. Providing any information to a random caller is not in your or your business’ best interest. Please give us a call with any questions.

About the Author - Mitchell M. Cohen is a Certified Public Accountant (CPA), a Certified Fraud Examiner (CFE) a Forensic Certified Public Accountant (FCPA) and a Certified Forensic Litigation Consultant (CFLC) with over 26 years of accounting and tax experience. Mr. Cohen is a Shareholder with ECS and has been with the firm since 2003. Mr. Cohen’s expertise includes expert guidance in many areas such as strategic business planning, financial negotiation, accounting system design, personal and corporate tax planning, IRS audits, financial statement compilations, reviews and audits in the areas of for profit, governmental and not-for-profit entities, manufacturing, distribution, interior design, catering companies and restaurants among many types of closely held businesses. Mr. Cohen has also conducted numerous forensic investigations in the areas of divorce, loss of income calculations, piercing the corporate veil, and conversion. Mr. Cohen is also a testifying expert witness.

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