Dirty Dozen Part 1 & 2 Tax Scams

 

Dirty Dozen part 1: Taxpayers should be aware of these tax scams

IRS Tax Tip 2019-47, April 24, 2019

The tax filing deadline has come and gone, but tax scammers continue to work. Again this year, the IRS highlights the twelve top scams in its "Dirty Dozen" list. These scams are often aggressive and happen throughout the year.

The schemes run the gamut from simple refund inflation scams to complex tax shelter deals. A common theme throughout all: scams put taxpayers at risk.

Here is a recap of the first six scams in this year's Dirty Dozen. Each one includes a link where taxpayers can go to learn more about that scam. This is the first tip of two tips recapping the list of all 12 scams.

Phishing: Taxpayers should be alert to potential fake emails or websites looking to steal personal information. The IRS will never initiate contact with taxpayers by email about a bill or tax refund. Don’t click on one claiming to be from the IRS.

Phone Scams: Phone calls from criminals impersonating IRS agents remain an ongoing threat to taxpayers. The IRS has seen a surge of these phone scams in recent years as con artists threaten taxpayers with things like police arrest, deportation, and license revocation.

Identity Theft: Taxpayers should be alert all year long to tactics aimed at stealing their identities. The IRS, working in conjunction with the Security Summit partnership of state tax agencies and the tax industry, has made major improvements in detecting tax return related identity theft during the last several years. The agency reminds taxpayers that they can help in preventing this crime. The IRS continues to aggressively pursue criminals that file fraudulent tax returns using someone else’s Social Security number.

Return Preparer Fraud: Taxpayers should be on the lookout for unscrupulous return preparers. The vast majority of tax professionals provide honest, high-quality service. However, there are some dishonest preparers who operate to scam clients. These unscrupulous preparers perpetuate refund fraud, identity theft, and other scams that hurt taxpayers.

Inflated Refund Claims: Taxpayers should take note of anyone promising inflated tax refunds. Those preparers who ask clients to sign a blank return, promise a big refund before looking at taxpayer records or charge fees based on a percentage of the refund are probably up to no good. To find victims, fraudsters may use flyers, phony storefronts or word of mouth through community groups where trust is high.

Falsifying Income to Claim Credits: Con artists may convince unsuspecting taxpayers to invent income to erroneously qualify for tax credits, such as the earned income tax credit. This is important now for taxpayers who filed an extension of more time to file their taxes. No matter what time of the year, taxpayers should file the most accurate tax return possible because they are legally responsible for what is on their return. This scam can lead to taxpayers facing large bills to pay back taxes, interest and penalties.

Dirty Dozen part 1: Taxpayers should be aware of these tax scams

Dirty Dozen part 2: Thieves work all year to scam taxpayers

IRS Tax Tip 2019-48, April 25, 2019

This is the second tip of two tips recapping the list of the IRS’s annual “Dirty Dozen” list of top 12 tax scams. Thieves work throughout the year – often aggressively – to scam taxpayers.

The schemes run the gamut from simple refund inflation scams to complex tax shelter deals. A common theme throughout all: scams put taxpayers at risk.

Here is a recap of the final six scams in this year's Dirty Dozen. Each one includes a link where taxpayers can go to learn more about that scam.

Falsely Padding Deductions on Returns: Taxpayers – especially those filing this summer after getting a filing extension – should avoid the temptation to falsely inflate deductions or expenses on their tax returns to pay less than what they owe or potentially receive larger refunds.

Fake Charities: Groups masquerading as charitable organizations solicit donations from unsuspecting contributors. Donors should be wary of charities with names similar to familiar or nationally-known organizations. Contributors should take a few extra minutes to make sure their hard-earned money goes to legitimate charities. IRS.gov has the tools taxpayers need to check out the status of charitable organizations.

Excessive Claims for Business Credits: Business owners should avoid improperly claiming the fuel tax credit, a tax benefit generally not available to most taxpayers. The credit is usually limited to off-highway business use, including use in farming. Taxpayers should also avoid misuse of the research credit. Improper claims often involve failures to participate in or substantiate qualified research activities or satisfy the requirements related to qualified research expenses.

Offshore Tax Avoidance: Successful enforcement actions against offshore cheating show it’s a bad bet to hide money and income offshore. People involved in offshore tax avoidance are best served by coming in voluntarily and getting caught up on their tax-filing responsibilities.

Frivolous Tax Arguments: Frivolous tax arguments may be used to avoid paying tax. Promoters of frivolous schemes encourage taxpayers to make unreasonable and outlandish claims about the legality of paying taxes despite being repeatedly thrown out in court. The penalty for filing a frivolous tax return is $5,000.

Abusive Tax Shelters: Abusive tax structures – including trusts and syndicated conservation easements – are sometimes used to avoid paying taxes. The IRS is committed to stopping complex tax avoidance schemes and the people who create and sell them. The vast majority of taxpayers pay their fair share, and everyone should be on the lookout for people peddling tax shelters that sound too good to be true. When in doubt, taxpayers should seek an independent opinion regarding complex products they are offered. 

Dirty Dozen part 2: Thieves work all year to scam taxpayers

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