The ‘Dirty Dozen’ Tax Scams of 2013: Don’t Get Scammed
We hear of scams and tax fraud every year, but how close have you been to actually being scammed and didn’t even know it? Hopefully this list will help keep your money in your pocket and your identity with you.
Tax scam artists are incredibly creative and sometimes the most intelligent fall victim to their dirty thieving. As Benjamin Franklin said: “An Investment in Knowledge Pays the Best Interest”, I offer you knowledge in the world of tax scamming. Be aware and be safe, oh and if you said “who would want to steal my identity” or “Let ‘em have at my bank account, there isn’t anything in there anyway” these are thinking methods that could make you a greater target. All a scam artist needs is a little information about you and they make whatever they need happen, all in your name. If you think money sucks today, try avoiding the signs and watch what happens if you fall prey to such a crime. You are important and valuable to a scam artist-Period!
THE ‘DIRTY DOZEN’ TAX SCAMS FOR 2013:
- Identity Thief: The IRS continues to increase its efforts against refund fraud, which includes identity theft. During 2012, the IRS prevented the issuance of $20 billion of fraudulent refunds, including those related to identity theft, compared with $14 billion in 2011.
- Phishing: No, this isn’t the fun kind where you have an ice cold beer and fry up some trout at the end of the day, this is a very common way to rob you blind. Phishing is a scam typically carried out with the help of unsolicited email or a fake website that poses as a legitimate site to lure in potential victims and prompt them to provide valuable personal and financial information. Armed with this information, a criminal can commit identity theft or financial theft.
- Return Preparer Fraud: A large percentage of taxpayers will use a tax professional to prepare their taxes. While most preparers are honest others are waiting to prey on your
For tips about choosing a preparer, red flags, details on preparer qualifications and information on how and when to make a complaint, visit www.irs.gov/chooseataxpro.
- Hiding Income Offshore: Over the years, numerous individuals have been identified as evading U.S. taxes by hiding income in offshore banks, brokerage accounts or nominee entities, using debit cards, credit cards or wire transfers to access the funds. Others have employed foreign trusts, employee-leasing schemes, private annuities or insurance plans for the same purpose.
- 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 in community churches around the country. These schemes promise refunds to people who have little or no income and normally don’t have a tax filing requirement – and are also often spread by word of mouth as unsuspecting and well-intentioned people tell their friends and relatives.
- Impersonation of Charitable Organizations: This is most common after a natural disaster. Following major disasters, it’s common for scam artists to impersonate charities to get money or private information from well-intentioned taxpayers. Scam artists can use a variety of tactics. Some scammers operating bogus charities may contact people by telephone or email to solicit money or financial information. They may even directly contact disaster victims and claim to be working for or on behalf of the IRS to help the victims 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. 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. This could result in repaying the erroneous refunds, including interest and penalties, and in some cases, even prosecution.
- False Form 1099 Claim: Don’t fall prey to people who encourage you to claim deductions or credits to which you are not entitled or willingly allow others to use your information to file false returns. If you are a party to such schemes, you could be liable for financial penalties or even face criminal prosecution.
- 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. These arguments are false 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.
- Falsely Claiming Zero Wages: Making up information to lower the amount of taxes one 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.
- Disguised Corporate Ownership:Third parties are improperly used to request employer identification numbers and form corporations that obscure the true ownership of the business.These entities can be used to under report income, claim fictitious deductions, avoid filing tax returns, participate in listed transactions and facilitate money laundering and financial crimes.
- Misuse of Trust: For years, unscrupulous promoters have urged taxpayers to transfer assets into trusts. While there are legitimate uses of trusts in tax and estate planning, some highly questionable transactions promise reduction of income subject to tax, deductions for personal expenses and reduced estate or gift taxes. Such trusts rarely deliver the tax benefits promised and are used primarily as a means of avoiding income tax liability and hiding assets from creditors, including the IRS.