Every year the IRS lists out the most aggressive scams of the year under its “Dirty Dozen” list. This list highlights various phishing and other scams that taxpayers might encounter. The current IRS list includes the following scams:
- Phishing: At the top fo the list is Phishing – fake e-mails/websites that try to steal personal information. The IRS specifically states that it will never contact a taxpayer via e-mail for a tax bill or refund.
- Phone Scams: Phone calls from criminals impersonating IRS officers and making various demands continue to be an ongoing threat to taxpayers. Amongst the various threats made are deportation, arrest, license revocation, etc.
- Identity Theft: Taxpayers should be careful about their personally identifiable information (PII) such as SSN and bank information. Fraudsters continue to file returns with the IRS using other taxpayers’ SSNs and personal information. The IRS does provide PINs to taxpayers which may be used for return filing purposes and to establish an identity on the return filed. However, prevention is always better than cure.
- Return Preparer Fraud: While a majority of the return preparers are honest professionals, some preparers are unscrupulous and tend to scam clients, defraud them, and hurt clients financially.
- Inflated Refund Claims: The IRS warns taxpayers to be wary of preparers who promise inflated refunds, ask taxpayers to sign blank returns, or otherwise try various means to defraud the IRS in the name of the taxpayer.
- Falsifying Income to Claim Credits: Fraudsters also have schemes to con taxpayers into reporting false income so that they may qualify for various credits such as the EIC. Taxpayers are responsible for reporting their income accurately and should remember that this could lead to huge penalties.
- Padding Deductions: Taxpayers sometimes inflate deductions on the returns so that overall tax liability reduces. However, it would do well to remember that the IRS can verify these deductions and if found to be overstated taxpayers may be heavily penalized.
- Fake Charities: Unsuspecting taxpayers might contribute to fake charities based on their supplication. Taxpayers should verify whether the charities they are contributing to are genuine or not especially if they are doing it online. IRS.Gov also provides tools to check this.
- Excessive Business Credits: Taxpayers should avoid the improper use of research credit and fuel tax credit. The requirements of these credits should be properly understood before using them on tax returns. Improper use could lead to heavy penalties in addition to revised tax bills.
- Offshore Tax Avoidance: Hiding money offshore is also a scam and one on which the IRS comes down heavily. People who have inadvertently or deliberately kept money offshore should try to voluntarily resolve the issue to minimize penal action.
- Frivolous Tax Arguments: Making outstanding and unacceptable claims to reduce tax is a burden to the government and will be thrown out of court. It would do taxpayers well to remember that filing a frivolous return actually invites a penal bill of $55,000.
- Abusive Tax Shelters: Abusive tax shelter schemes such as the use of trusts are others are used to avoid paying taxes or reduce the amount payable. The IRS tends to come down heavily on these schemes and is committed to preventing such schemes.
The IRS publishes this list every year and it would also serve taxpayers to remember that they are legally responsible for the numbers on their return no matter who prepares the same and should therefore review them carefully prior to filing.