The Internal Revenue Service is warning about a phone scam that has already bilked millions from unsuspecting taxpayers.

The widespread scam includes bogus tax agents telling victims they owe money and then demanding they pay with a prepaid debit card or by wire transfer. Victims are told they could be arrested, deported or lose their business or driver's license if don't comply, said J. Russell George, Treasury inspector general for tax administration.

"This is the largest scam of its kind that we have ever seen," George said. "The increasing number of people receiving these unsolicited calls from individuals who fraudulently claim to represent the IRS is alarming."

The scammers use fake names and IRS badge numbers and may be able to recite the last four digits of the victim's Social Security number. They also use a number designed to appear on caller ID as if it is from the IRS. Some victims also receive official-looking emails claiming to be from the IRS.

More than 20,000 taxpayers have been targeted in the scam and more than $1 million has been lost. Reports of the scam have been made in nearly every state.

George said taxpayers who owe the IRS are contacted first by mail and the agency never asks for payment by debit card or wire transfer and doesn't ask for credit card numbers over the phone.

The Inspector General's office is working to trace the origins of the bogus calls, George said.

If you think you've been a victim of the scam, you can find the IRS resources here.