With all the turmoil concerning the taxation of those AIG, and similar, bonus payments, as discussed in Taxing Bonuses, it's time for a change of pace. There's only so much critical analysis a person can usefully pursue, such as the one in Tax Concept Spawns Tax Details, before concluding that it makes sense to wait and see how the legislation fares in the Senate and whether it survives the President's veto pen.

A different perspective on the challenges of tax administration highlights a similar problem. The problem in this instance is the inability of state, local, and national governments, and even international agencies, to curtail or even eliminate the "tax phishing" that infects life in this digital age. It's a problem for the people who fall victim. It's a problem for the IRS, because it must shift resources to dealing with the problem and helping victims. It's a problem for the robustness of the internet, because the backlash against these outlaws could end up restricting innocent internet users. Why is this problem similar to the bonus taxation problem? In both instances governments struggle to find ways to deter in appropriate behavior, and to fix the consequences of that behavior, without affecting adversely those who are not among those who think law is nothing more than a distraction to their unflinching pursuit of money in total disregard of what is right and wrong.

There is a difference, though, between the two problems. In one case, the arrangements were crafted carefully, and the ability of fact finders to ascertain the truth was impeded by cunningly disguised implementation. In the other case, the sloppiness betrays the incompetence of the money chasers, even though there are, unfortunately, people who don't know enough to recognize the obvious and almost comical attempt to prosper through greed.

So here's a chance to experience what it's like to face a quiz, or more accurately, a semester exercise, in a tax course. You can pretend to be an associate in a law firm who is asked by a partner whether an email received by a client should be ignored or given a response. If that thought is too disturbing, pretend that a relative or friend has approached you to ask how they should react to this email. Your task is easier than it could be, because I will tell you the first part of your response. You would tell the partner to tell the client to ignore the email, just as you would tell the relative or friend to delete it and move on. Your responsibility is to identify the clues in the email that suggest it's not the IRS message it claims to be.

Here's the email, which is a verbatim replication of one that I received very recently:

*******************************************************************
From: Department of The Treasury [mailto:message157@legalnotice.org]
Sent: Friday, February 27, 2009 8:48 AM
Subject: Tax return (Message ID: JN34534362)

After the last annual calculations of your fiscal activity we have determined that you are eligible to receive a tax refund under section 501(c) (3) of the Internal Revenue Code. Tax refund value is $189.60.

Please submit the tax refund request and allow us 6-9 days in order to IWP the data received. If u don't receive your refund within 9 business days from the original IRS mailing date shown, you can start a refund trace online.

If you distribute funds to other organization, your records must show wether they are exempt under section 497 (c) (15). In cases where the recipient org. is not exempt under section 497 (c) (15), you must have evidence the funds will be used for section 497 (c) (15) purposes.

If you distribute fund to individuals, you should keep case histories showing the recipient's name and address; the purpose of the award; the maner of section; and the realtionship of the recipient to any of your officers, directors, trustees, members, or major contributors.

To access the form for your tax refund, please click here

This notification has been sent by the Internal Revenue Service, a bureau of the Department of the Treasury.

Sincerely Yours,

John Stewart
Director, Exempt. Organization
Rulings and Agreements Letter
Internal Revenue Service
********************************************************************************

Don't read further in this post until you try to identify the clues. Some are very obvious, and you should be able to collect enough of them to earn a decent grade. Some take a bit more thought, and finding those can bring the grade up to a very good level. A few of the clues are a bit oblique, but they provide a chance for the A students to stand out.

So don't peek at the list that follows. So to push those clues further down the page I will provide two more bits of information.

First, it would not be surprising to discover that you have identified a clue that I don't identify. The outcome of collective effort on client problems usually exceeds the output of a single attorney. That's why professionals work as teams. The tax lawyer sometimes brings in one or more other tax experts, and when the matter warrants, an accountant, an appraiser, an actuary, an engineer, or some other professional who brings a special expertise.

Second, here's how in my "score against a standard" grading approach you would do with this problem (roughly, because there are insufficient total points to generate a course grade and cut-offs are adjusted to prevent one point from making a difference in a course grade):

16 to 20 clues: A
15 clues: A-
14 clues: B+
12 or 13 clues: B
11 clues: B-
9 or 10 clues: C+
7 or 8 clues: C
6 clues: C-
4 or 5 clues: D
3 or fewer clues: F

Ready for the clues? Here they are, in the order they appear in the phishing email

1. The email address associated with the Department of the Treasury is not from a Department of the Treasury internet domain.

2. Tax refunds are not issued under section 501(c)(3). Section 501(c)(3) is the definition of organizations that are tax-exempt on account of being organized and operated for religious, charitable, scientific, and other specific purposes.

3. If a tax refund has been determined, there ought be no need to request it.

4. The acronym IWP makes no sense in the context of the message, and even if one could come up with words that would fit those letters, it is highly unlikely that a message with respect to a tax refund would use the term as an infinitive form of a verb.

5. It is patently absurd to think that a government message sent by email would be written using text messaging shortcuts, as is the case with "If u don't receive."

6. There is no "IRS mailing date shown."

7. The email is purportedly sent by the Department of the Treasury, and thus one would expect a reference to "the original Department of the Treasury mailing date"?

8. The grammar in "If you distribute funds to other organization" suggests that the message writer does not use English as a primary language, and is the sort of error that would not persist in a form letter of the sort that goes through multiple levels of review.

9. Even more incorrect grammar shows up in "If you distribute funds to other organization" because either organization should be in the plural or the word other should be another.

10. The misspelling of "wether" corroborates the thought that this email originates with someone who does not use English as a primary language, and is yet another type of error that would have been caught, as described in #8, above.

11. There is no section 497, so there surely is no section 497(c)(15) and there are no such things as section 497(c)(15) purposes.

12. Yet another misuse of the English language shows up in the phrase "If you distribute fund to individuals."

13. The meaning of the phrase "the maner of section" can be guessed only by making the assumption that the word "selection" was intended but ended up as "section."

14. The word "maner" must come from the same dictionary as does the word "wether" and corroborates the point made in #10, above.

15. If "maner" and "wether" aren't enough to raise suspicions, perhaps "realtionship" does.

16. The URL that shows up under "click here" surely is not a Department of the Treasury or IRS web site.

17. If the notification was sent by the Internal Revenue Service, why is it packaged as a message from the Department of the Treasury?

18. The IRS does not appoint people to be the Director of a Letter.

19. The placement of a period after the word Exempt is yet another grammatical error demonstrating that the email is a deception.

20. Anyone who reads the paper knows that the IRS does not use email to initiate contact with a taxpayer concerning refunds.

Sadly, somewhere someone has clicked on the link in hopes of getting a few dollars, and ended up providing a criminal with sufficient information to permit the criminal to steal the person's identity or to use some other nefarious technique to acquire funds to which the criminal is not entitled. Is it not time to being teaching high school students how to identify phishing emails? Surely that is as important a life skill as are most of the others that are taught in our school systems? Hoping that someone's common sense would be sufficient is asking too much.

So how many clues did you identify?

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