The IRS has issued a stringent warning against what it refers to as the “Dirty Dozen” of tax scams. Let’s discuss what those tax scams are. You should be familiar with some of them. Hopefully, this article will help you identify these scams as soon as you come across them.
1: Identity theft
Identity theft is when someone impersonates you, uses your Social Security number, files a tax return in your name and collects a refund. The IRS has been working hard to solve this problem. There were over 775 people across the US that were convicted of this crime in 2015.
2: Phone scams
Phone scams are pretty common too. Usually someone claiming to be from the IRS calls you and demands that you make a payment ASAP. They ask for your bank account information and credit card number. Remember, the IRS never makes calls like that asking for a payment.
Phishing scams are a menace. Basically, you will receive a fake email impersonating a bank or a major organization asking you for your personal information. These emails look very authentic, so you have to be doubly careful when revealing your password, credit card number, or Social Security number on email.
4: Tax return preparer fraud
There are a number of fraudulent tax preparers out there, many of whom are con artists. The IRS offers tips on how to identify legitimate tax preparers.
5: Offshore tax avoidance
The Offshore Voluntary Disclosure Program is a program started by the IRS, which helps taxpayers come clean on their offshore assets. Not disclosing your money hidden overseas is a tax fraud.
6: Big refund promise
There are some accounting firms that promise huge refunds. You should be aware that such firms are up to no good. Remember, you will never get more than what you are really due.
7: Fake charities scam
There are many fake charities that claim that contributions made to them are tax deductible. It is only at the last moment that you find out that these charities are not legitimate. Do your research on such charities at sites such as GiveWell, GuideStar or CharityWatch before investing in them.
8: Inflated deductions
Some taxpayers exaggerate deductions and make false claims. The IRS takes such scams very seriously.
9: False business credit claims
Some taxpayers claim false tax credits related to business. There is a $5000 fine for that. This should be avoided at all cost.
10: Falsely claiming tax credits
Don’t claim tax credits for which you are not eligible for. This is seen as a major offense by the IRS.
11: Tax avoidance shelters
Some accounting companies may try to steer you towards phony tax shelters. Be aware of them, the IRS takes such scams very seriously. You will end up paying more on them on back taxes.
12: Ridiculous arguments
Some taxpayers pick up ridiculous arguments with the IRS claiming that they don’t owe any tax obligations and have the right not to pay their taxes for various reasons – they don’t like the current President, or that they disagree with the country’s foreign policy, etc. Doing so could get you a $5000 fine from the IRS.