Don’t Fall for Tax Scams!

Money FlagEvery year, people fall prey to tax scams. We want you to be safe and informed – and not become a victim.

Taxpayers who get involved in illegal tax scams can lose their money, or face stiff penalties, interest and even criminal prosecution. Remember, if it sounds too good to be true, it probably is. Be on the lookout for these scams. 

Identity theft. Tax fraud using identity theft tops this year’s Dirty Dozen list. In many cases, an identity thief uses a taxpayer’s identity to illegally file a tax return and claim a refund.

fLAG eAGLEPervasive telephone scams.  The IRS has seen an increase in local phone scams across the country. Callers pretend to be from the IRS, The Department of the Treasury and the GAO (Government Accountability Office) in hopes of stealing money or identities from victims. If you get a call from someone claiming to be from these organizations do not provide any personal information or send them any money. Take down their contact information, so we can help verify if they are calling from a legitimate government organization. Often our government has specific telephone prefixes not available to the general public. If you know you owe taxes or think you might owe taxes, call the us and we can assist in dealing with the IRS.

Phishing.  Phishing scams typically use unsolicited emails or fake websites that appear legitimate. Scammers lure in victims and prompt them to provide their personal and financial information. The fact is that the IRS does not initiate contact with taxpayers by email to request personal or financial information. This includes any type of electronic communication, such as text messages and social media channels.

MONEYFalse promises of “free money” from inflated refunds.  The bottom line is that you are legally responsible for what’s on your tax return, even if someone else prepares it. Scam artists often pose as tax preparers during tax time, luring victims in by promising large tax refunds. Taxpayers who buy into such schemes can end up penalized for filing false claims or receiving fraudulent refunds. Take care when choosing someone to do your taxes.

Return preparer fraud.  About 60 percent of taxpayers will use tax professionals this year to prepare their tax returns. Most return preparers provide honest service to their clients. But some dishonest preparers, prey on unsuspecting taxpayers, and the result can be refund fraud or identity theft.  Choose licensed professionals and reputable companies when hiring an individual or a company to do your return.  Only use a tax preparer that will sign your return and enter their IRS Preparer Tax Identification Number (PTIN).

OFFSHOREHiding income offshore.  While there are valid reasons for maintaining financial accounts abroad, there are reporting requirements. U.S. taxpayers who maintain such accounts and do not comply with these requirements are breaking the law. They risk large penalties and fines, as well as the possibility of criminal prosecution. The IRS has prosecuted and collected billions of dollars in back taxes, interest and penalties from people who participated in offshore voluntary disclosure programs since 2009. Don’t become another  defense statistic. It is a taxpayers right to reduce your taxes, but it also in the best interest of taxpayers to come forward and pay the taxes owed. Call our offices and we will help you legitimately save on your taxes.

Impersonation of charitable organizations. Taxpayers need to be sure they donate to recognized charities. Following major disasters, it’s common for scam artists to impersonate charities to get money or personal information from well-intentioned people. They may even directly contact disaster victims and claim to be working with our government to help the victims file casualty loss claims and get tax refunds.

False income, expenses or exemptions.  Falsely claiming income you did not earn or expenses you did not pay in order to get larger refundable tax credits is tax fraud. This includes false claims for the Earned Income Tax Credit. These taxpayers often end up repaying the refund, including penalties and interest or faces criminal prosecution.

Frivolous arguments.  Frivolous schemes encourage taxpayers to make unreasonable and outlandish claims to avoid paying the taxes they owe. There are numerous legitimate ways to contest tax liabilities, before the IRS and  in court. Don’t get trapped  by someone suggesting crazy schemes or defenses to reduce your tax liability or fight the IRS. These may lead to higher taxes, penalties and interest or even criminal prosecution.

Falsely claiming zero wages or using false Form 1099.  Filing false information with the IRS is an illegal way to try to lower the amount of taxes owed. Typically, fraudsters use a Form 4852 (Substitute Form W-2) or a “corrected” Form 1099 as a way to improperly reduce taxable income to zero. The fraudster may also submit a false statement denying wages and taxes reported by a payer to the IRS.

Abusive tax structures. These abusive tax schemes often involve sham business entities and dishonest financial arrangements for the purpose of evading taxes. The schemes are usually complex and involve multi-layer transactions to conceal the true nature and ownership of the taxable income and assets. The schemes often use Limited Liability Companies, Limited Liability Partnerships, International Business Companies, foreign financial accounts and offshore credit/debit cards.

Misuse of trusts.  There are reasonable uses of trusts in tax and estate planning. However, questionable transactions also exist. They may promise reduced taxable income, inflated deductions for personal expenses, ways to hide your assets, the reduction or elimination of self-employment taxes and reduced estate or gift transfer taxes.  These trusts rarely deliver promised tax benefits.

Tax scams can take many other forms as well. The best defense is to remain vigilant.

This article is provided for information purposes only and should not be relied upon for legal or financial advice. We would be happy to discuss how the information in this article affects or may help you. For more details about this matter, please contact our offices at 847-466-7947847-466-7947 of 702-966-2770702-966-2770.
IRS CIRCULAR 230 DISCLOSURE: Pursuant to requirements imposed by the Internal Revenue Service, any tax advice contained in this communication (including any attachments) is not intended to be used, and cannot be used, for purposes of avoiding penalties imposed under the United States Internal Revenue Code or promoting, marketing or recommending to another person any tax-related matter.

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Eight Tax Savers for Parents

familyYour children may help you qualify for valuable tax benefits. Here are eight tax benefits parents should look out for when filing their federal tax returns this year.

1. Dependents.  In most cases, you can claim your child as a dependent. This applies even if your child was born anytime in 2013.

2. Child Tax Credit.  You may be able to claim the Child Tax Credit for each of your qualifying children under the age of 17 at the end of 2013. The maximum credit is $1,000 per child. If you get less than the full amount of the credit, you may be eligible for the Additional Child Tax Credit.

3. Child and Dependent Care Credit.  You may be able to claim this credit if you paid someone to care for one or more qualifying persons. Your dependent child or children under age 13 are among those who are qualified. You must have paid for care so you could work or look for work.

4. Earned Income Tax Credit.  If you worked but earned less than $51,567 last year, you may qualify for EITC. If you have three qualifying children, you may get up to $6,044 as EITC when you file and claim it on your tax return.

5. Adoption Credit.  You may be able to claim a tax credit for certain expenses you paid to adopt a child.

6. Higher education credits.  If you paid for higher education for yourself or an immediate family member, you may qualify for either of two education tax credits. Both the American Opportunity Credit and the Lifetime Learning Credit may reduce the amount of tax you owe. If the American Opportunity Credit is more than the tax you owe, you could be eligible for a refund of up to $1,000.

7. Student loan interest.  You may be able to deduct interest you paid on a qualified student loan, even if you don’t itemize deductions on your tax return.

8. Self-employed health insurance deduction.  If you were self-employed and paid for health insurance, you may be able to deduct premiums you paid to cover your child under the Affordable Care Act. It applies to children under age 27 at the end of the year, even if not your dependent.

This article is provided for information purposes only and should not be relied upon for legal or financial advice. We would be happy to discuss how the information in this article affects or may help you. For more details about this matter, please contact our offices at 847-466-7947847-466-7947 of 702-966-2770702-966-2770.
IRS CIRCULAR 230 DISCLOSURE: Pursuant to requirements imposed by the Internal Revenue Service, any tax advice contained in this communication (including any attachments) is not intended to be used, and cannot be used, for purposes of avoiding penalties imposed under the United States Internal Revenue Code or promoting, marketing or recommending to another person any tax-related matter.

IRS Criminal Prosecutions Rose under Obama

USA CtDuring the Obama administration, the number of criminal prosecutions referred by the Internal Revenue Service to the Justice Department has increased 23.4 over the Bush years. Prosecutions in fiscal year 2013 alone jumped 30.6 percent from last year to 2,010 new prosecutions, a banner year for criminal prosecutions.

Convictions for tax crimes are also drawing slightly longer average prison terms. Under Obama prison terms are 27 months versus only 25 months under Bush, according to information obtained by TRAC under the Freedom of Information Act from the Executive Office for United States Attorneys.

For both administrations, the odds have been roughly 50-50 that federal prosecutors will accept an IRS referral for criminal prosecution. However, a surge in IRS criminal investigations referred under Obama has fueled an increase in the number of cases prosecuted. This has occurred even though the number of IRS fulltime criminal investigators has not grown: the average of 2,758 IRS criminal investigators during the Bush years has shrunk to 2,705 (a 2% drop) during the Obama administration.

Overall, prosecutions of this type are up 63.4 percent from the level of 1,230 reported in 2003, with “Fraud and False Statements” at the top of the list (230 in 2013). This is followed closely by “Attempt(s) to Evade or Defeat Tax”, with 200 prosecutions in 2013.

This article is provided for information purposes only and should not be relied upon for legal or financial advice. We would be happy to discuss how the information in this article affects or may help you. For more details about this matter, please contact our offices at 847-466-7947 of 702-966-2770.
IRS CIRCULAR 230 DISCLOSURE: Pursuant to requirements imposed by the Internal Revenue Service, any tax advice contained in this communication (including any attachments) is not intended to be used, and cannot be used, for purposes of avoiding penalties imposed under the United States Internal Revenue Code or promoting, marketing or recommending to another person any tax-related matter.

During the Obama administration,