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Federal student tax: What is that?

You are probably as confused as we were when we read the recent IRS warning. That is because there is no “federal student tax.”

This is the hook for the newest tax scam designed to trick college students. People behind these schemes are no longer targeting solely elderly taxpayers. We have been saying it on this blog, but again the IRS will not call you out of the blue or threaten to have you immediately arrested.

Another day, another tax scam

This scam involves a caller threatening a student with arrest if he or she doesn’t quickly pay the “federal student tax.” These bullying tactics and others like them have resulted in more than $36 million in taxpayer losses.

The IRS watches closely for these scams and sends out a warning when a new variant emerges. Commissioner John Koskinen warned, “Taxpayers should remain vigilant and not fall prey to these aggressive calls demanding immediate payment of a tax supposedly owed.”

This year, the variety of scams and speed with which they are Changing is staggering. Here are some that we have warned readers about since the beginning of the year:

  • Demands for immediate payment of back taxes via iTunes gift cards
  • Spoofing executive emails to request W-2 information from HR professionals around the tax filing deadline
  • Seemingly insignificant request to verify return data

This lends itself to a review of some IRS collection tools. When you owe back taxes, you can expect to receive a Notice of Deficiency form through the mail. This will state what the IRS believes you owe. You can challenge or appeal this amount if you believe it is in error.

If you are unable to pay your tax bill, the IRS may seek to obtain a lien against your property. Further down the road, the IRS could seek to levy assets in your bank account or garnish your wages.

What the IRS will not do

Here is a short list of some of the things that should set off warning flags:

  • Any threat of arrest – the IRS will not send local police to arrest you, if you did not pay your tax bill.
  • Demands for immediate payment – An IRS agent must offer you the opportunity to question or appeal the amount.
  • Requests for prepaid debit cards or wire transfers – The Service does not request this information over the phone.

If you owe taxes, there are options available to get you back on track. Whether that is an installment agreement, offer in compromise or currently not collectible status, an experienced tax attorney can explain which might be best and guide you through the process.

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