IRS Warns of Tax Scam Targeting Nonresident Aliens and International Taxpayers

Form W-8BEN is a legitimate U.S. tax exemption document, but it can be submitted only through a withholding agent, “a U.S. or foreign person that has control, receipt, custody, disposal or payment of any item of income of a foreign person that is subject to withholding.”

The IRS said criminals have repurposed an old scheme whereby fraudsters used the form to lure unsuspecting nonresidents into divulging personal details, such as passport numbers, PIN codes and their mother’s maiden name — the kind of information the legitimate Form W-8BEN does not solicit.

The agency said the fraudulent forms may claim that anti-money laundering regulations require a review of a person’s information and ask that the form be completed.

Another ploy is to claim that the person is exempt from tax reporting and withholding on income including interest paid, so the attached form should be filled out in order to protect exemption from tax.

The IRS’s alert noted three things that it never does:

• Demand that people use a specific payment method, such as a prepaid debit card, gift card or wire transfer
• Demand immediate tax payment
• Threaten to bring in local police, immigration officers or other law enforcement to arrest people for not paying

— Check out Advisor Sent to Prison for Scamming Seniors: Enforcement on ThinkAdvisor.