Every 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.
Pervasive 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.
False 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).
Hiding 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.