As Tax Filing Deadline Nears, Officials Warn Against Scams
Recently, the United States Justice Department urged the public to be weary of dishonest tax return preparers, noting that each taxpayer is responsible for the contents of their own return.
Guaranteed refunds or tax reduction promises are two types of potential scams that the public should be aware of, according to Acting Assistant Attorney General Caroline D Ciraolo of the Tax Division.
In 2014, taxpayers in the country filed 150 million returns.
Statistics from the Treasury Inspector General for Tax Administration show that the IRS identified over 2.1 million of the 150 million returns as claiming fraudulent refunds with a total of more than $15.7 billion.
Improper tax return preparation is one way taxpayers made up the billions of dollars in fraudulent refunds.
In 2015, the Tax Division permanently shut down more than 35 fraudulent tax return preparers across the county, ranging from large-scale preparation franchises to small independently run preparers.
It is so much of an issue that the IRS has designated return preparer fraud as one of 2016’s “Dirty Dozen” tax scams to avoid.
“Every year, thousands of federal income tax returns are prepared by people who care much more about making a quick buck than about preparing accurate returns,” said Acting Assistant Attorney General Ciraolo. “Most tax return preparers are honest. But some preparers who charge clients a percentage of their tax refund intentionally prepare false returns to increase their clients’ refund, and thus their own fees.
“Likewise, some preparers who charge by the form will intentionally prepare incorrect forms that their clients don’t need in order to increase their compensation. Taxpayers might think that they’re getting a good deal on their taxes, or that as long as someone else prepares the return, they’re not responsible. They’re wrong. Taxpayers who have their return prepared incorrectly are required to pay the tax they owe, or pay back the refund they weren’t entitled to get. These clients might also owe interest and penalties, which can be substantial.”
The Department of Justice has released the following red flags when choosing a return preparer:
- Your refund should never be deposited directly into a preparer’s bank account.
- Never sign a blank return or a blank form, or sign a return or a form without reading it first.
- Don’t use a preparer who mischaracterizes your expenses.
- Do not use a preparer who fabricates business expenses or deductions, or who claims bogus credits to which you are not entitled, such as the Earned Income Tax Credit, the child care credit, or the education credit.
In addition to being aware of fraudulent preparation, Senator Mazie Hirono spoke at the Japanese Cultural Center of Hawai’i this weekend, noting the importance of being aware of scam artists.
“Scam artists and predators are clever in their attempts to swindle taxpayers out of their refunds. Kupuna and their families need to remain vigilant and protect themselves as we approach the tax filing deadline,” said Senator Hirono.
Full list of annual “Dirty Dozen” of tax scams for the 2016 filing season:
- Identity Theft
- Phone Scams
- Return Preparer Fraud
- Offshore Tax Avoidance
- Inflated Refund Claims
- Fake Charities
- Falsely Padding Deductions on Returns
- Excessive Claims for Business Credits
- Falsifying Income to Claim Credits
- Abusive Tax Shelters
- Frivolous Tax Arguments