70 Percent of IRS Phone Tax Scams Involve iTunes Gift Cards: Treasury Inspector General

Since 2013, the Feds have seen a 233 percent increase in victims reporting IRS phone scams. State officials say tax fraud will cause delays on refunds for all Californians.

As the April 18 income tax filing deadline quickly approaches, many taxpayers are looking forward to the end of tax season. But for state and federal investigators, tax fraud has quickly grown into a year-round problem with consequences for all taxpayers.

“It's too easy picking up the phone and pretending that you're the IRS and then threatening somebody and scaring them into pay,” Tim Camus with the Treasury Inspector General’s Office told NBC Bay Area.

Since 2013, his office has seen a 233 percent increase in victims reporting IRS phone scams. Camus says his office has also noticed a surprising trend where scammers are turning to iTunes gift cards in order to swindle taxpayers out of millions.

“About 70 percent of the victims today are being convinced to pay this bogus tax bill using an iTunes card,” Camus told NBC Bay Area.

Camus said his office received nearly 40,000 calls from victims reporting IRS phone scams during the last year -- a sharp increase from just 12,000 reports in 2013.

San Jose-resident Keylla Coldiron knows firsthand how convincing these scammers can be. Like most parents, Coldiron would do anything for her kids. So when the single mother of two received a threatening call from someone posing as the IRS, she says she immediately feared for her family.

“I don’t want [anything] to happen to my kids,” Coldiron said. Armed with convincing details about her background and employment history, the scammers demanded Coldiron pay them $6,500 immediately, or she would be arrested at home.

“How am I supposed to pay my bills? I don’t have that kind of money,” Coldiron said. After pleading with the perpetrators, Coldiron negotiated the fraudulent payment down to $400.

But instead of paying by credit card, check or money order, Coldiron says the callers insisted she pay them in iTunes gift cards by reading the numbers to the scammers over the telephone. “They said just do it, and I said OK. They kept telling me, ‘Do not hang up.’ It felt like I was being held [hostage] on the phone,” she said.

While remaining on the phone the entire time, Coldiron rushed to a nearby Rite Aid and emptied her bank account, buying several iTunes gift cards to pay off her supposed debt. But it wasn’t enough, and the callers asked for more money.

“That's when I started getting aggressive with them and said, 'This isn't right. Are you guys really IRS?'” Coldiron said. “And they hung up on me. Pretty much.”

Coldiron realized she was tricked, falling for one of the latest, most aggressive tax scams sweeping the country.

The average amount lost to an IRS phone scams is about $500, although Camus says he has seen victims lose as much as $500,000 to this sophisticated scheme.

Camus believes that scammers have turned to iTunes in response to a concerted effort by law enforcement to inform taxpayers that the IRS will never demand payment in the form of a money order or prepaid Visa cards.

The Treasury Department and FBI have been successful shutting down several illegal call centers in the last year, including one center based in India with Bay Area ties. Still, the threat of tax fraud remains.

Here in California, the state Franchise Tax Board (FTB) says they’ve also had to combat a recent spike in fraud, in the form of fraudulent tax returns.

“The scammers are getting more sophisticated every year, and they're getting even bolder,” FTB Program Specialist Daniel Tahara told NBC Bay Area. “There have been instances this past year where the scammers actually called us directly to inquire about the status of their refunds.”

Tahara says his office stopped 21,000 fraudulent returns worth $70 million last year. That figure is up from 6,200 fraudulent refunds totaling more than $11 million in 2013.

Despite their efforts, Tahara admits many more fraudulent schemes likely go undetected as the problem has become harder to catch.

“It's hard to differentiate between a scammer or the authentic taxpayer filing,” Tahara explained. “If you actually compare a fraudulent return to an authentic return, in some cases the fraudulent return is actually more accurate and contains less errors than the actual authentic taxpayer.”

As a result, the tax board has stepped up its review procedures, taking more time to process and double check every return. That adds up to longer wait times for anyone expecting a refund, whether or not they are directly impacted by a tax scam.

Coldiron was able to get her money back after explaining to the Rite Aid sales clerk she was scammed. She says she’s now speaking out about how she was fooled, in hopes that others will learn from her experience.

Camus says the Inspector General’s Office is working with Apple to shut down the use of iTunes cards for tax scams, although the scammers are already branching off into other schemes using Paypal and Moneypak to convince people to pay out money they don’t owe.

Camus says the average amount lost in one of these scams is about $500. although he has seen victims lose as much as a half-million dollars to this sophisticated scam.

Adding to the confusion for taxpayers, the IRS recently hired a debt collection firm to go after money on old debts.

Still, tax officials caution that federal representatives will never threaten you with arrest and never accept gift cards as payment.

If you receive a suspicious call, the IRS suggests that you ask the caller for a call back number and contact the IRS Tax Help Line.

If you have a tip  Investigative Unit, give us a call at 1-888-996-8477, or you can reach us via email at . You can also email Investigative Reporter Stephen Stock directly at
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