Internal Revenue Service

Identity Thieves Target Non-Residents with U.S. Source Income

The United States Internal Revenue Service Qualified Intermediary Program is tracking a fraudulent scheme targeting non-resident aliens who have income from a United States source. The scheme uses fictitious IRS correspondence and an altered IRS form in an attempt to trick the foreign persons into disclosing their personal and financial data. The information fraudulently obtained is then used to steal the taxpayer's identity and financial assets.

In this particular scam, an altered IRS Form W-8BEN, "Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding," is sent with correspondence purportedly from the IRS to non-resident aliens who have invested in U.S. property, such as securities or bonds, and therefore have U.S. sourced income. A non-resident alien with U.S. sourced income may pay U.S. income tax at the full or at a reduced rate, depending on the terms of the tax treaty the U.S. has with the foreign person's country.

The Internal Revenue Service immediately advised financial institutions to alert their overseas branches to warn their customers about this scam.

Although there's no way of knowing how many non-resident aliens have responded to the bogus request for personal information, there are approximately 2.5 million non-resident aliens who receive U.S. sourced income, based on the number of Forms 1042-S that were issued last year. The 1042-S is used to report the amount of U.S. income a non-resident alien earned in that year.

The altered W-8BEN form asks the recipient for detailed personal information, such as date of birth, passport number, bank name, account number, type of account and date opened, and information on the recipient's spouse, children, and parents. The legitimate IRS Form W-8BEN is used to establish the non-resident alien's foreign status and determine whether the foreign person is subject to U.S. income tax. It doesn't ask for any personal information, except in some cases for a Social Security or IRS-generated Taxpayer Identification Number. So far the QI team has received reports of the scheme targeting non-resident aliens in Europe and the Caribbean. The thieves ask their victim to send their information to a fax number in the United States, which is re-routed and changed frequently.

Generally, identity thieves use someone's personal data to steal his or her financial accounts, run up charges on the victim's existing credit cards, apply for new loans, credit cards, services or benefits in the victim's name and even file fraudulent tax returns.

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