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IRS Warns About Gift Card Scams To Pay Fictitious Tax Bills During the Holiday Season

Gift cards continue to be one of the most popular gifts for the holiday season. The National Retail Federation (NRF) predicts that in 2022, the average consumer will buy 3.2 gift cards with an average value of $51.47.

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Total spending on gift cards in 2022 is estimated to top $28.6 billion, with restaurant, department store and bank-issued cards being the most popular.

But gift card scams also continue to rise as the Federal Trade Commission (FTC) warned last year ahead of the holiday season.

Today, the IRS issued a new warning about scammers asking taxpayers to pay fictitious tax bills with gift cards, and the timing seems to be related due the popularity of gift cards during the holiday season.

The scam usually starts with a con artist posting as an IRS agent contacting the person by phone, email, text message or through social media, claiming the taxpayer has a tax liability or is linked to a criminal activity.

To pay the fictitious tax bill and clean up the situation immediately to avoid further collection efforts (harassment), the scammer will coerce the person to buy gift cards from various stores and provide the “agent” with the gift card number and pin.

That’s all the con artists need to use the gift cards, as both pieces of information allow scammers to make purchases online.

The IRS warns that it generally will “first mail a bill to any taxpayer who owes taxes” and never “demand that taxpayers pay taxes without the opportunity to question or appeal the amount they owe.”

In addition, the IRS said it never threatens to bring in local police, immigration officers, or other law enforcement to arrest the taxpayer unless the tax liability is paid.

Gift Cards Are for Gifts – Not To Pay Bills

One of the reasons gift card scams are rising as they do not offer the same protections as credit, debit cards, or P2P payment services like PayPal.

Most stores will require that gift cards be purchased with either a debit card or cash, not through a credit card, where chargebacks are often easier. This makes it very difficult, if not impossible to nullify the transaction by filing a chargeback with the card issuer or bank.

Since most gift cards are anonymous — meaning there is no name or address attached to cards — it is nearly impossible to trace them back to the scammers who make online purchases shipped to a fake delivery address.

That makes them a perfect vehicle for scammers as a means to obtain spendable money with little risk to them of being traced.

The bottom line is that gift cards are for gifts, not for paying taxes, bills, or other debts.

The IRS warning is simply summarized as well. Anytime someone claims to be from the IRS or any government agency, trying to collect a tax liability that the taxpayer has no knowledge about, it should be a warning sign.

Gift Card Scams Resources

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