Dirty Dozen Tax Scams
The IRS recently released its annual list of “Dirty Dozen tax scams”. Please review the following twelve scams and beware they are on the rise.
- Telephone scams: Over the past few years there has been a rash of bogus phone calls by people impersonating IRS personnel. These people threaten people with deportation, arrest, and other actions if the taxpayer does not pay their outstanding tax debt. Don’t fall prey to these calls. The IRS can only contact you by mail only.
- Phishing: This scheme often arises when an unsolicited e-mail or fictitious website lures in potential victims and prompts them to provide personal financial information. Remember the IRS can only contact you by mail.
- Identity theft: This occurs when, without your permission, someone uses your personal information such as your name, social security number, or other identifier to perpetrate a fraud. Keep your personal information in a safe place.
- Tax return preparer fraud: Of course, the vast majority of tax return preparers are honest. But some disreputable preparers set up shop during tax filing season resulting in fraud or identity theft.
- Offshore assets: Taxpayers may evade tax responsibilities by hiding income in offshore banks, brokerage accounts, or other entities.
- Inflated refund claims: Fake tax return preparers lure victims in by promising large or unrealistic federal tax refunds. They may use fliers, advertisements, or personal contacts to spread the word.
- Charitable organization imposters: After a major disaster, scammers come out of the woodwork, trying to impersonate charities so they can pry away money from taxpayers. You may be contacted by phone, e-mail, or mail.
- Fake 1099s and W-2s: Criminals may use self-prepared, corrected or otherwise falsified forms to improperly report taxable income to zero.
- Abusive tax shelters: These can range from domestic and foreign trust arrangements to sophisticated strategies using foreign financial secrecy laws or credit and debit cards.
- False income, expense, or exemptions: This scam involves inflating or including income on a tax return that was never earned, either as wages or as self employment income, to maximize refundable credits like the earned income tax credit. Unscrupulous tax return preparers may help to facilitate this process.
- Unauthorized fuel credits: The fuel tax credit, which is generally limited to off-highway business use or farming, isn’t available to most taxpayers. But some tax preparers entice taxpayers into erroneously claiming the credit to inflate refunds.
- Frivolous tax arguments: The IRS hears numerous outlandish arguments for avoiding tax filing requirements or paying your fair share of tax. Be wary of promoters pushing such claims only to clog up the courts.