Dirty Dozen Tax Schemes

TaxesThe Dirty Dozen listing, compiled by the IRS each year, lists a variety of common scams taxpayers can encounter.

  • Identity Theft – Identity theft occurs when someone uses your personal information without your permission to commit fraud.
  • Phishing – Phishing is typically carried out with the help of an unsolicited email or a fake website to lure potential victims and prompt them to provide valuable personal and financial information
  • Return Preparer Fraud – Some unscrupulous preparers prey on unsuspecting taxpayers, and the result can be refund fraud or identity theft.
  • Hiding Income Offshore – U.S. taxpayers who maintain offshore accounts and who do not comply with reporting and disclosure requirements are breaking the law.
  • “Free Money” from the IRS & Tax Scams Involving Social Security – Scammers build false hopes and charge people good money for bad advice including encouraging taxpayers to make fictitious claims for refunds or rebates based on false statements of entitlement to tax credits.
  • Impersonation of Charitable Organizations – Following major disasters, it’s common for scam artists to impersonate charities to get money or private information from well-intentioned taxpayers
  • False/Inflated Income – Including income that was never earned, either as wages or as self-employment income in order to maximize refundable credits.
  • False Form 1099 Refund Claims – Don’t fall prey to people who encourage you to claim deductions or credits to which you are not entitled or willingly allow others to use your information to file false returns.
  • Frivolous Arguments – Promoters of frivolous schemes encourage taxpayers to make unreasonable and outlandish claims to avoid paying the taxes they owe.
  • Falsely Claiming Zero Wages – Form 4852 (Substitute Form W-2) or a “corrected” Form 1099 is used as a way to improperly reduce taxable income to zero.
  • Disguised Corporate Ownership – Third parties are improperly used to request employer identification numbers and form corporations that obscure the true ownership of the business.
  • Misuse of Trusts – While there are legitimate uses of trusts in tax and estate planning, some highly questionable transactions promise reduction of income subject to tax, deductions for personal expenses and reduced estate or gift taxes.

Be aware of scams to avoid making costly mistakes that can have a long term impact.  Not sure if information you heard is accurate?  Contact your trusted CPA for advice.

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