12 Tax Scams to Look Out for in 2016

Posted by wadmin on Thursday, March 10, 2016

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Tax season is here! While you’re collecting your paperwork and getting your financial records in order, don’t let your guard down this season when it comes to filing your taxes. Scammers today are on the prowl to steal your money and your personal information:

Tax Scams to Watch For

This year’s tax scams lineup includes:

  • Identity theft. The No. 1 scam this year is tax-related identity theft, which the IRS defines as someone using a taxpayer’s stolen Social Security number to file a return and claim a fraudulent refund.
  • Phone tax scams.  Phone calls from criminals impersonating IRS agents remain an ongoing threat. The IRS has seen a surge of these phone tax scams in recent years as scam artists threaten taxpayers with police arrest, deportation and license revocation, among other things.
  • Phishing. Phishing emails and text messages appear to come from the IRS and direct consumers to go to what resembles an official website, such as IRS.gov. The sites also may carry malware, which can infect people’s computers and allow criminals to access your files or track your keystrokes to gain information. “The IRS won’t send you an email about a bill or refund out of the blue,” said Koskinen. If you receive a suspicious email, forward it to phishing@irs.gov.
  • Return preparer fraud. While the vast majority of tax professionals provide honest high-quality service, the IRS warns of “dishonest preparers who set up shop each filing season to perpetrate refund fraud, identity theft and other scams that hurt taxpayers.” It happens frequently enough that this scam makes it onto the “Dirty Dozen” list every year.
  • Offshore tax avoidance. Hiding money or income in offshore accounts in order to avoid paying U.S. taxes is among the enduring tax scams.
  • Inflated refund claims. This scam, closely related to return preparer fraud, fools consumers into believing preparers who promise a big refund. Inflated refund claims often involve claims for tax credits that taxpayers are not entitled to, such as education credits, the earned income tax credit, or EITC, and the American opportunity tax credit. Scam artists use flyers, advertisements, phony storefronts and word of mouth via community groups to find victims.
  • Fake charities. Groups masquerade as charitable organizations to attract donations from unsuspecting contributors. Fake charities often use names similar to well-known organizations and may set up fake websites, which can steal your credit card number and other personal information. Charity tax scams tend to increase in the wake of large-scale natural disasters, so don’t make any contributions without checking first with the IRS or one of the three major charity watchdogs: The BBB (Better Business Bureau’s) Wise Giving Alliance, Charity Navigator, and CharityWatch.
  • Falsely padding deductions on returns. New this year to the “Dirty Dozen” list, this scam consists of consumers falsely inflating deductions, such as charitable contributions, or expenses on their returns to under-pay what they owe or possibly receive larger refunds.
  • Excessive claims for business credits.  Taxpayers claim the fuel tax credit, research credit, or other business credits without satisfying the proper requirements.
  • Falsifying income to claim credits. Shady tax preparers sometimes talk taxpayers into falsifying their income to qualify for the Earned Income Tax Credit. The penalty is big bills in back taxes and interest, and sometimes even criminal prosecution. 
  • Abusive tax shelters. If a complex tax avoidance scheme sounds too good to be true, it probably is. 
  • Frivolous tax arguments. Don’t even think of using unreasonable or outlandish claims to avoid paying taxes. The IRS doesn’t have a sense of humor, witnessed by the penalty for filing a frivolous tax return: $5,000. 

SRC: Read the complete article by Consumer Reports here: www.consumerreports.org/taxes/dirty-dozen-tax-scams/

 

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