The Internal Revenue Service releases a list of its least-favorite tax scams every year. “Scam artists will tempt people in-person, on-line and by email with misleading promises about lost refunds and free money.Don’t be fooled by these,” warns IRS Commissioner Douglas Shulman.
Here is the current list of what the IRS is warning about this tax season.
1. Identity theft “An IRS notice informing a taxpayer that more than one return was filed in the taxpayer’s name may be the first tipoff the individual receives that he or she has been victimized.”
2. Phishing “If you receive an unsolicited email that appears to be from either the IRS or an organization closely linked to the IRS, such as the Electronic Federal Tax Payment System, report it by sending it to firstname.lastname@example.org.”
3. Tax-preparer fraud “In 2012 every paid preparer needs to have a Preparer Tax Identification Number (PTIN) and enter it on the returns he or she prepares.”
4. Hiding income offshore “Since 2009, 30,000 individuals have come forward voluntarily to disclose [undeclared] foreign financial accounts. . . With new foreign account reporting requirements being phased in over the next few years, hiding income offshore will become increasingly more difficult.”
5. ‘Free money’ from the IRS and tax scams involving Social Security “Flyers and advertisements for free money from the IRS, suggesting that the taxpayer can file a tax return with little or no documentation, have been appearing at community churches around the country.”
6. False/inflated income and expenses “Claiming income you did not earn or expenses you did not pay in order to secure larger refundable credits such as the Earned Income Tax Credit could have serious repercussions…. Fraud involving the fuel tax credit is considered a frivolous tax claim and can result in a penalty of $5,000.”
7. False Form 1099 refund claims “In this ongoing scam, the perpetrator files a fake information return, such as a Form 1099 Original Issue Discount (OID), to justify a false refund claim on a corresponding tax return.”
8. Frivolous arguments “Promoters of frivolous schemes encourage taxpayers to make unreasonable and outlandish claims to avoid paying the taxes they owe. The IRS has a list of frivolous tax arguments that taxpayers should avoid.”
9. Falsely claiming zero wages “Filing a phony information return is an illegal way to lower the amount of taxes an individual owes. Typically, a Form 4852 (Substitute Form W-2) or a ‘corrected’ Form 1099 is used as a way to improperly reduce taxable income to zero. The taxpayer may also submit a statement rebutting wages and taxes reported by a payer to the IRS. ”
10. Abuse of charitable organizations and deductions “The IRS is investigating schemes that involve the donation of non-cash assets – including situations in which several organizations claim the full value of the same non-cash contribution. Often these donations are highly overvalued or the organization receiving the donation promises that the donor can repurchase the items later at a price set by the donor.”
11. Disguised corporate ownership “Third parties are improperly used to request employer identification numbers and form corporations that obscure the true ownership of the business…. The IRS is working with state authorities to identify these entities and bring the owners into compliance with the law.”
12. Misuse of trusts “IRS personnel have seen an increase in the improper use of private annuity trusts and foreign trusts to shift income and deduct personal expenses. As with other arrangements, taxpayers should seek the advice of a trusted professional before entering a trust arrangement.
Richard R. Coshow Office: 719-748-5524 Cell: 719-776-0441