Every year the IRS compiles its list of “Dirty Dozen,” which lists the common scams that taxpayers may encounter anytime but become most popular during “tax season.”
Some tricks made their debut in years passed. Here are some of the newer phone scams like threatening calls from criminals, and fake phishing attempts featured in 2018’s Dirty Dozen. Don’t fall prey to:
1. Falsely padding deductions: The IRS described this tax scam as one in which unscrupulous tax return preparers overstate deductions including charitable contribution deductions, business expenses, and claiming credits that the taxpayer is not entitled to like the earned income tax credit (EITC) or the child tax credit. Unscrupulous return preparers use this scam to perpetrate refund fraud, identity theft, and other scams.
2. Fake charities: IRS warns taxpayers to beware of fraudsters masquerading as charities to take advantage of people’s goodwill, especially after a disaster. It warns people not to give out personal information to anyone especially credit card, Social Security, and bank account numbers. It advises people that fake charities often have names similar to reputable charities and may create fake websites to mimic them.
3. Improperly claiming business credits: This scam includes claiming research tax credits and fuel tax credits the taxpayer is not entitled to. To claim the research credit, taxpayers must meet stringent requirements and need to document all expenses.
4. Tax return preparer fraud: The IRS warned taxpayers to be on the lookout for tax return preparers who trick people into taking credits or deductions they aren’t entitled to. The IRS notes that unscrupulous return preparers operate every filing season to perpetrate refund fraud and identity theft.
5. Identity theft: IRS defines tax-return identity theft as someone using a stolen Social Security number or taxpayer identification number to file a fraudulent return claiming a refund. This category also includes false Forms 1120, U.S. Corporation Income Tax Return, being filed fraudulently for businesses. The IRS suggests the following steps to fight these attempts:
• avoid phishing emails;
• do not respond to threatening phone calls, and texts from thieves; and
• do not click on links or open attachments in emails from unknown or suspicious sources; and
• take steps to protect personal data.
6. Phone scams: Reports of criminals impersonating the IRS and threatening arrest, deportation, or driver’s license revocation if the taxpayer doesn’t pay a phony tax bill are increasing. They often use an altered caller ID to make it look like the call is coming from the IRS or another agency. They give fake IRS titles and badge numbers to appear legitimate, as well as use the taxpayer’s name, address, and other personal information. A new twist on this scam involves criminals who file false tax returns using the taxpayer’s name and bank account information, followed by a phone call to get the taxpayer to send the scammer the money that was deposited.
7. Falsely inflating tax refunds: Unscrupulous tax return preparers may lure in unsuspecting taxpayers with promises of inflated tax refunds. People with no filing obligation, such as older people and low-income taxpayers, are often targeted by these scam artists, including those who have no filing obligation. Some prepare returns for these unsuspecting taxpayers and pocket the refunds.
8. Phishing schemes: Taxpayers and businesses should beware of phishing schemes, which use fake emails or websites to steal personal information. The scammers are increasingly targeting payroll professionals, human resources personnel, and even schools!
9. Falsified income, fake Forms 1099: This scam involves two types of fraud —
• The second scheme involves the filing of fake Forms 1099-MISC, Miscellaneous Income, in which scammers tell taxpayers about a fictitious held-aside account for which the only way to redeem or draw on it is to use some form of made-up financial instrument such as a bonded promissory note that purports to be a debt payment method for credit cards or mortgage debt.
10. Abusive tax shelters: The IRS warned against using all types of abusive tax shelters, particularly those involving micro-captive insurance companies. This is the fourth consecutive year that the IRS has highlighted abusive micro-captive insurance company tax shelters on the list.
11. Frivolous tax arguments: Taxpayers, often on the advice of promoters, make spurious arguments that they are not subject to federal income tax on religious or moral grounds, that only federal employees are subject to federal income tax, or that only foreign-source income is taxable. There are stiff penalties for frivolous tax arguments starting at $5000.
12. Offshore tax cheating: This long-standing tax scam is defined as avoiding taxes by hiding money or other assets in unreported offshore accounts. Many people have been identified as attempting to evade U.S. taxes by hiding income in offshore banks, brokerage accounts, or nominee entities, which are then accessed using debit cards, credit cards, or wire transfers and various other schemes
Contact your trusted advisor and professional CPA at Fuoco Group if you feel you are in need of tax planning and filing advice.
Call the IRS if you feel you are the target of a scam. Be advised that the IRS will NEVER call you to make threats or demand payment. If you receive a phone call from someone you suspect is not an IRS employee, record the employee’s name, badge number, call back number and caller ID if available. Then call 1-800-366-4484 to determine if the caller is an IRS employee with a legitimate need to contact you.
The IRS does not use unsolicited email, text messages or any social media to discuss your personal tax issues. Report all unsolicited email claiming to be from the IRS to phishing@irs.gov.
