Tags: IRS | fraud | scam | tax

IRS: Beware of the ‘Dirty Dozen’ Tax Scams

Friday, 29 Mar 2013 09:52 AM

By Michael Kling

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The IRS released its annual “Dirty Dozen” tax scams in an effort to protect taxpayers from the many forms of scams.

Some scams occur year round, but many types of tax scams spike during tax-filing season, the IRS warns. Some involve theft of identities or financial. Others entail tax preparers filing bogus information on forms.

The top 12 tax scams are:

Editor's Note:
The IRS’ Worst Nightmare — How to Pay Zero Taxes

Identity theft. Someone steals your personal financial information like your name or Social Security number to get your tax refund or to commit fraud or other crimes.

Phishing. Criminals use emails or fake websites to gather personal financial information they use for identity theft or financial theft. The IRS does not use email, text messages or social media to request financial information.

Return preparer fraud. Unscrupulous preparers steal identities or commit refund fraud. Use only preparers who sign the returns and enter their IRS Preparer Tax Identification Number.

Hiding income offshore. Tax evaders hide income in offshore banks, brokerage accounts or nominee entities. Others use foreign trusts, employee-leasing schemes, private annuities or insurance plans.

“Free Money” and Social Security scams. Claiming they can obtain “free money from the IRS,” scammers encourage filers to make false statements. They also sometimes promise non-existent Social Security refunds or rebates. After they fraudsters are long gone, the claims are ultimately rejected.

Impersonating charitable organizations. Following natural disasters, scammers run bogus charities to solicit money or financial information over the phone or by email. They may tell disaster victims they can help file casualty loss claims and get tax refunds.

False or inflated income and expenses. Including income that was never earned, either as wages or as self-employment income in order to maximize refundable credits, is another popular scam.

False Form 1099 Refund Claims. Perpetrators file a fake information return, such as a Form 1099 Original Issue Discount, to justify a false refund claim.

Frivolous arguments. Promoters encourage taxpayers to make unreasonable and outlandish claims to avoid paying taxes.

False zero wage claims.
Typically with this type of scam, a Form 4852 (Substitute Form W-2) or a “corrected” Form 1099 is used to improperly reduce taxable income to zero.

Disguised corporate ownership. Third parties are used to request employer identification numbers and form corporations that obscure the real ownership of the business and evade taxes.

Misuse of trusts. Although some trusts are legitimate, others are highly questionable.

New York Attorney General Eric Schneiderman urges tax filers to investigate tax preparers before picking one.

“While there are plenty of legitimate and law-abiding tax preparers doing business, there are some who use the allure of fast cash to take advantage of unsuspecting consumers,” he stated in a press release. “When hiring tax preparation services, consumers must have as much information as possible to protect themselves from fraud, and should file a complaint if they feel they’ve been victimized.”

Editor's Note: The IRS’ Worst Nightmare — How to Pay Zero Taxes

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