Scammers Never Sleep Beware the IRS 2019 Dirty Dozen

Scammers Never Sleep! Beware the IRS 2019 “Dirty Dozen!”

Scammers are hard at work making tax season difficult for preparers and taxpayers alike. These common scams have peaked during filing season – not just individuals, but businesses also should be forewarned and forearmed! It may look like a duck, walk like a duck, and quack like a duck, but it is FRAUD.

The Dirty Dozen Tax Scams for 2019 so far:

1. Internet phishing scams that lead to tax-related fraud and ID theft. Both taxpaying individuals and businesses need to be alert for a continuing “tricky and clever” surge of fake emails, text messages, websites and social media attempts to steal personal information. Watch out for emails and other scams posing as the IRS, promising a big refund or personally threatening people. Don’t open attachments or click on links in emails!
2. Tax-time phone scams find aggressive criminals posing as IRS agents in order to steal money or personal information via phone scams or “vishing” (voice phishing). These are often robo-calls threatening arrest, deportation or license revocation if the victim doesn’t pay a bogus tax bill. These con artists may have some of the taxpayer’s information, including their address, the last four digits of their Social Security number or other details.
3. Tax-related identity theft may have dropped off a bit as other newer scams have taken hold, but remains serious. Someone uses a stolen Social Security number or ITIN to file a fraudulent return claiming a refund. Once only individuals were preyed upon, now business filers should be aware that cybercriminals also file fraudulent 1120s using stolen business identities.
4. Promises of inflated tax refunds are a common scam tactic during filing season. Con artists promising overly large refunds, fictitious rebates, benefits or tax credits frequently prey on older Americans and low-income taxpayers and those who don’t have a filing requirement. Scam artists can use flyers, advertisements, phony storefronts or word-of-mouth to attract victims. They may even make presentations through community groups or churches. They may also file a false return in their client’s name, and the client never knows that a refund was paid.
5. Schemes of falsifying income and creating bogus documents again make the Dozen, as the IRS warns about scams including the creation of bogus 1099s. Con artists commonly use this trick as well as related scams designed to get taxpayers to erroneously claim undeserved credits such as the Earned Income Tax Credit. The IRS also cautions taxpayers to avoid getting caught up in scams disguised as a debt payment option for credit cards or mortgage debt, a scheme usually involving the filing of a 1099-MISC and/or bogus financial instruments such as bonds, bonded promissory notes or worthless checks.
6. Falsely inflated deductions or credits on returns often crop up as crooked tax preparers overstate deductions such as charitable contributions, medical or business expenses or the EITC and other credits. Often by the time the IRS contacts the taxpayer about these problems, the promoter or preparer is long gone.
7. Cons for kids, disasters, charitable causes and the goodness of most taxpayers are low-hanging fruit for scammers masquerading as charitable organizations. Using a deduction as bait, these fake charities often lure victims into making ineligible donations, ultimately leaving the unsuspecting donor in the lurch. Be wary of charities with names that are similar to familiar or nationally known organizations.
8. Improperly claiming various business tax credits is a common scam used by unscrupulous tax preparers. Two credits often targeted for abuse are those for research and fuel taxes: Improper claims for the R&D Credit generally involve a failure to participate in or substantiate qualified research activities and/or a failure to satisfy the requirements related to qualified research expenses; the Fuel Tax Credit is generally limited to off-highway business use or use in farming and is unavailable to most taxpayers.
9. Failure to report offshore funds remains a crime, and an entry on this year’s list. After IRS efforts on offshore issues in recent years, many taxpayers have already voluntarily disclosed their participation in these schemes; the IRS conducted thousands of offshore-related civil audits that resulted in the payment of tens of millions of dollars in unpaid taxes and has pursued criminal charges leading to billions of dollars in criminal fines and restitution. Numerous individuals have been identified as evading U.S. taxes by attempting to hide income in offshore banks, brokerage accounts or nominee entities then accessing the cash using debit cards, credit cards or wire transfers. Others have used foreign trusts, employee-leasing schemes, private annuities or insurance plans.
10. Abusive tax shelters, trusts, and conservation easements make this year’s list as abusive tax-avoidance schemes along with their crooked promoters. Abusive trusts, abusive micro-captive insurance shelters, and abusive syndicated conservation easements all start with a legitimate tax-planning tool that is improperly distorted almost always by a promoter to produce benefits that are too good to be true and ultimately seriously compromise the taxpayer.
11. Frivolous tax arguments: Does the First Amendment allows taxpayers to refuse to pay taxes on religious or moral grounds? Are the “employees” subject to federal income tax those who work for the federal government? Is only foreign-source income taxable? In each case: NO. Frivolous tax arguments like these have been tossed from courts.
12. Last but not least: “Choose tax preparers carefully,” says the IRS, and with good reason. There are dishonest preparers out there perpetrating refund fraud, ID theft and other scams. Look for a preparer who’s available year-round and ask to see the PTIN.

Please share this list with your family, friends, and business associates. To report tax scams email phishing@irs.gov. If you suspect tax fraud, the IRS hotline is: 800-829-0433. If you are a victim, here are the steps to take:

• File a complaint with the Federal Trade Commission at www.consumer.ftc.gov or the FTC Identity Theft hotline at 877-438-4338 or TTY 866-653-4261.
• Contact one of the three major credit bureaus to place a “fraud alert’ on your account:
  • Equifax – www.equifax.com, 800-525-6285
  • Experian – www.experian.com, 888-397-3742
  • TransUnion – www.transunion.com, 800-680-7289
• Close any accounts that have been tampered with or opened fraudulently.
• If your SSN has been compromised and you know or suspect you may be a victim of tax-related identity theft, take these additional steps:
• Respond immediately to any IRS notice; call the number provided.
• Complete IRS Form 14039, Identity Theft Affidavit. Use a fillable form at IRS.gov, print, then mail or fax according to instructions.
• Continue to pay your taxes and file your tax return, even if you must do so by paper.
• If you previously contacted the IRS and did not have a resolution, contact the Identity Protection Specialized Unit at 800-908-4490.

The IRS has greatly reduced the time it takes to resolve identity theft cases to about 120 days. If you are unable to get your issue resolved and are experiencing financial difficulties, contact the Taxpayer Advocate Service toll-free at 877-777-4778.

CONTACT US: Our award winning tax and accounting team is here to serve you all year long, and our financial advisors and professionals offer a wide portfolio of services for individuals as well as businesses. Proper tax planning today can yield tax savings tomorrow – no need to fall prey to unscrupulous scammers. Remember, if it sounds too good to be true, it probably is phony baloney! Call toll free for a consultation at 855-534-2727.