You may encounter at any time a variety of tax fraud schemes, from simple refund inflation scams to complex tax shelter deals. Here is a list of some of the frauds to be vigilant about:
1. Phishing — Be alert to potential fake emails or websites looking to steal personal information. The IRS doesn’t initiate contact about a bill or refund.
2. Phone scams — Phone calls from criminals impersonating IRS agents: There’s been a surge in these, with con artists threatening taxpayers with police arrest, deportation and license revocation.
3. Identity theft — Be as alert as ever about tactics to steal your identity. Be especially aware of criminals filing fraudulent tax returns using someone else’s Social Security number.
4. Return preparer fraud — Some dishonest preparers scam clients and perpetuate refund fraud and identity theft to hurt taxpayers. Go with preparers who have recognized credentials.
5. Inflated refund claims — Some preparers may promise to inflate refunds, asking clients to sign a blank return and promise a big refund, charging fees based on a percentage of the refund. Such fraudsters use flyers, phony storefronts or word of mouth via community groups where trust is high.
6. Falsifying income to claim credits — Con artists convince unsuspecting taxpayers to invent income to erroneously qualify for such tax credits as the earned income tax credit. Remember that you are legally responsible for what’s on your return. This scam can lead to taxpayers facing large bills to pay back taxes, interest and penalties.
7. Falsely padding deductions on returns — Avoid the temptation to inflate deductions or expenses on returns for a fatter refund or to owe less.
8. Fake charities — Be wary of charities with names similar to familiar or nationally known organizations. They may be illegal groups masquerading as charities. IRS.gov has tools taxpayers can use to check the status of charitable organizations.
9. Excessive claims for business credits — Avoid improperly claiming the fuel tax credit, which is usually limited to off-highway business use in farming. The research credit also needs to be substantiated, satisfying the requirements related to qualified research expenses.
10. Offshore tax avoidance — It’s a bad idea to hide money and income offshore. The IRS suggests that you come in voluntarily and get caught up on your tax-filing responsibilities.
11. Frivolous tax arguments — Promoters of frivolous schemes encourage taxpayers to make unreasonable and outlandish claims about the legality of paying taxes despite repeatedly being thrown out in court. The penalty for filing a frivolous tax return is $5,000.
12. Abusive tax shelters — Tax structures such as trusts and syndicated conservation easements are sometimes used to avoid paying taxes. The IRS suggests that you should be on the lookout for people peddling tax shelters that sound too good to be true. When in doubt, seek an independent opinion about complex products you’re being offered.
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