2019 Dirty Dozen Tax ScamsMarch 28, 2019
Phishing tops the IRS’ “Dirty Dozen” Tax Scams list for 2019, as it has for the past couple years. Taxpayers should also watch out for phone scams, phony charities and more.
The Internal Revenue Service (IRS) has just wrapped up its annual “Dirty Dozen Tax Scams” which it compiles every tax season to remind taxpayers to remain vigilant against illegal tax schemes (many of which peak during filing season). Contrary to popular belief, the most successful hacks aren’t a product of state of the art technology – just bad guys preying on the less informed and vulnerable. Just this week I was targeted by both a phishing and phone scam! –hardly state of the art attacks. Here’s how you can protect yourself.
2019’s Dirty Dozen
- Phishing- Never click on an email claiming to be from the IRS! The IRS will never initiate contact with you via email regarding a bill or tax refund. These phony emails are nothing more than scams to steal your personal information.
- Phone scams- Did you receive a threatening phone call from the “IRS” asking you to pay an overdue tax bill through a wire transfer or prepaid debit card? This is a scam! The IRS will never call you without first sending a bill through the mail. They will also never request an immediate payment without allowing you to question it, require that you pay in a certain manner, and of course they would never threaten you with arrest, deportation, etc.
- Identity theft- The IRS has made major improvements in detecting tax related identity theft in recent years, but they want to remind taxpayers that they can help in preventing this crime by being on the lookout for schemes including phishing attempts.
- Return preparer fraud- While the vast majority of tax professionals provide honest, high quality service, there are dishonest preparers out there who aim to scam clients, perpetuate refund fraud, identity theft and more.
- Inflated refund claims- Watch out for preparers who ask you to sign a blank return, and promise a big refund without taking a look at your records, or charge fees based on a percentage of the refund. Think twice about using tax services advertised on flyers, phony storefronts or through community groups.
- Falsifying income to claim credits- Criminals may attempt to convince you to invent income to erroneously qualify you for tax credits. You could face large bills to pay back taxes, interest and penalties if you don’t file the most accurate tax return possible.
- Falsely padding deductions on returns- Don’t be tempted to falsely inflate deductions or expenses on your tax returns so that you pay less than what you owe or potentially receive a higher refund.
- Excessive claims for business credits- Similarly, there are a few tax credits that are often falsely claimed, including the fuel tax credit and research and development (R&D) credit.
- Fake charities- Be wary of charities with names similar to nationally known organizations—they could be phony! Take a minute to ensure that you’re donating to a legitimate charity. IRS.gov has a search feature, Exempt Organizations Select Check that allows you to find legitimate, qualified charities to which donations may be tax-deductible.
- Offshore tax avoidance- The IRS continues to deal with taxpayers avoiding taxes by hiding money and assets in unreported offshore accounts. While many taxpayers voluntarily disclosed their foreign financial assets through the Offshore Voluntary Disclosure Program (OVDP), there are still many who have yet to come forward. Those involved with offshore tax avoidance should disclose sooner rather than later to avoid hefty penalties.
- Frivolous tax arguments- This scheme involves criminals encouraging taxpayers to make unreasonable and outlandish legal claims to avoid paying taxes. Almost always these arguments are thrown out of court. An example of a frivolous tax argument is “The first amendment allows taxpayers to refuse to pay taxes on religious or moral grounds.” Don’t get talked into a frivolous tax argument, you could face criminal prosecution and other penalties!
- Abusive tax shelters- Criminals will often use what are known as “abusive tax shelters,” which are investment vehicles with no purpose other than to reduce your tax liability. An abusive tax shelter will often take the form of a partnership or trust, and if you’re caught using one, you will face applicable taxes plus interest and penalties.
Don’t fall victim to the dirty dozen. Remember, you’re especially vulnerable during tax filing season! Does something seem suspicious to you? Contact us.