IRS’s “Dirty Dozen” Tax Scams for 2015
Each year the IRS releases a list of “Dirty Dozen” tax scams—a list of the 12 most prevalent tax scams the IRS feels that taxpayers need to be aware of. Many of the scams peak during filing season as taxpayers file their returns.
Here is a recap of the IRS’s “Dirty Dozen” scams in 2015:
- Excessive Claims for Fuel Tax Credits. Improper claims for the fuel tax credit generally come in two forms. An individual or business may make an erroneous claim on their otherwise legitimate tax return. Or an identity thief may claim the credit in a broader fraudulent scheme.
- Falsifying Income to Claim Credits. Some taxpayers falsely increase the income they report to the IRS in order to maximize refundable credits. Taxpayers should avoid inventing income to erroneously claim tax credits, and should avoid preparers who encourage them to participate in this scam.
- Abusive Tax Shelters. Abusive tax schemes have evolved from simple structuring of abusive domestic and foreign trust arrangements into sophisticated strategies that take advantage of the financial secrecy laws of some foreign jurisdictions and the availability of credit/debit cards issued from offshore financial institutions. Abusive tax schemes take many forms, but generally all have a common purpose of avoiding taxes. The IRS’s Criminal Investigation (CI) division has developed a nationally coordinated program to combat these abusive tax schemes.
- Hiding Income with Fake Documents. Filing a phony information return, such as a Form 1099 or W-2, is an illegal way to lower the amount of taxes an individual owes. Taxpayers are legally responsible for what is on their returns regardless of who prepares the returns, and may face steep penalties or criminal charges for filing or participating in the filing of falsified documents.
- Phone Scams. There has been a surge in this type of scam in the last year, and scammers have defrauded taxpayers out of millions of dollars through its use. Scammers impersonate IRS agents and call taxpayers demanding payment for taxes that are purportedly owed for previous tax periods. As part of the scam, the scammers will threaten their targets with levies, arrest, license revocation, and other things if the taxes are not paid immediately. Read more about these telephone scams here.
- Phishing. Scammers use fake emails or websites to try and steal an unsuspecting taxpayer’s personal information. The emails and websites, which are made to appear as though they are genuinely from the IRS, even using the IRS’s logo and other material, ask for taxpayers to click on a link or to enter personal information that the scammers will then use for their own criminal purposes, including identity theft and filing of false returns that claim false refunds. The IRS will never send a taxpayer an email about a bill or refund out of the blue, or ask for you to provide personal information over email. Don’t click on an email attachment or link or website claiming to be from the IRS that takes you by surprise. They may be scams to steal your personal information. To be sure, the IRS only has one website: www.IRS.gov.
- Identity Theft. In an ever-increasing digital age, identify theft is becoming more and more prevalent each year. During tax season, identity thieves will use someone else’s Social Security number to file a tax return claiming a fraudulent refund. Through its Criminal Investigation division, the IRS continues to aggressively pursue the criminals filing false returns. This is an ongoing battle, as identity thieves continue to create new ways of stealing personal information and using it for their gain.
- Return Preparer Fraud. About 60 percent of taxpayers use tax professionals to prepare their returns. Although the vast majority of tax professionals provide honest high-quality service, there are some dishonest preparers who set up shop each filing season to perpetrate refund fraud, identity theft, and other scams that hurt taxpayers. Taxpayers need to be on the lookout for unscrupulous return preparers, as well-intentioned taxpayers can be misled by preparers who don’t understand taxes or who mislead people into taking credits or deductions they aren’t entitled to in order to increase their fee.
- Offshore Tax Avoidance. Through the years, offshore accounts have been used to lure taxpayers into scams and schemes. Taxpayers may be tempted to employ the use of offshore accounts to avoid taxes by hiding money and assets. While there may be legitimate reasons for maintaining financial accounts abroad, there are reporting requirements that need to be fulfilled. U.S. taxpayers who maintain such accounts and who do not comply with reporting requirements are breaking the law and risk significant penalties and fines, as well as the possibility of criminal prosecution. Taxpayers are best served by coming in voluntarily and getting their taxes and filing requirements in order. The IRS offers the Offshore Voluntary Disclosure Program (OVDP) to help people get their taxes in order.
- Inflated Refund Claims. Scam artists routinely pose as tax preparers during tax time, luring victims in by promising large federal tax refunds or refunds that people never dreamed they were due in the first place. Scammers prey on people who do not have a filing requirement, such as low-income individuals or the elderly, on non-English speakers, who may or may not have a filing requirement, and others. They build false hope by duping people into making claims for fictitious rebates, benefits or tax credits. They charge good money for very bad advice, which is likely to come back to hurt the taxpayers, who are legally responsible for what is on their returns even if the returns were prepared by someone else.
- Fake Charities. Scammers will masquerade as a charitable organization to attract donations from unsuspecting contributors or to steal personal information from their victims. This is not uncommon in the wake of significant natural disasters, when scam artists impersonate charities to get money or private information from well-intentioned taxpayers. Contributors should take a few extra minutes to ensure their hard-earned money goes to legitimate and currently eligible charities. The IRS’s Exempt Organization Select Check has the tools taxpayers need to check out the status of charitable organizations.
- Frivolous Tax Arguments. Promoters of frivolous schemes encourage taxpayers to make unreasonable and outlandish claims to avoid paying the taxes they owe. These arguments are wrong and have been thrown out of court. While taxpayers have the right to contest their tax liabilities in court, no one has the right to disobey the law or disregard their responsibility to pay taxes.
Illegal scams such as the “Dirty Dozen” tax scams identified by the IRS can lead to significant penalties and interest for taxpayers, as well as possible criminal prosecution. The IRS’s Criminal Investigation (CI) division works closely with the Department of Justice (DOJ) to shutdown scams and prosecute the criminals behind them. Taxpayers should remember that they are legally responsible for what is on their tax returns even if it is prepared by someone else.
If you are concerned about falling victim to a tax scam, a tax attorney who knows the tax laws can make sure you follow the law when preparing your tax return. If you are the victim of a tax scam, a tax attorney can advise you as to what steps you should take and can represent you to if the IRS is coming after you.
We’re here to help. Contact the tax attorneys at the Politte Law Offices today.