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IRS Releases List of 2017 Tax Scams

February 25, 2017, 10:37 AM HST
* Updated February 24, 7:54 AM
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The Internal Revenue Service has announced its annual “Dirty Dozen” list of tax scams for 2017 identifying schemes that taxpayers may encounter year-round, especially during tax-filing season.

Taxpayers are advised to guard against any attempts to steal personal information, money scams or coercion into questionable behaviors with taxes.

“Taxpayers can and should stay alert to new schemes which seem to constantly evolve. We urge them to do all they can to avoid these pitfalls – whether old or new,” said IRS Commissioner John Koskinen.

Taxpayers are encouraged to review the list online and be on the lookout for potential scams.

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Con artists who engage in illegal schemes can face steep fines and criminal prosecution, according to the IRS. IRS Criminal Investigation works closely with the Department of Justice to stop scams and prosecute their perpetrators. The IRS also reminds taxpayers that they are legally responsible for what is on their tax return, even if it is prepared by someone else. To ensure you work with a qualified tax preparer, follow the IRS’ “Choosing a Tax Professional” guidelines.

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The 2017 IRS “Dirty Dozen” scams are listed as follows:

Phishing: This includes fake emails or websites looking to steal personal information. The IRS will never initiate contact with taxpayers via email about a bill or refund. Be wary of these sites, and void clicking on emails claiming to be from the IRS.

Phone Scams: Phone calls from criminals impersonating IRS agents remain an ongoing threat. The IRS has seen a surge of these phone scams in recent years as con artists threaten taxpayers with police arrest, deportation and license revocation, among other things.

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Identity Theft: The IRS advises that taxpayers be wary of identity theft, especially around tax time.

Return Preparer Fraud: Beware of deceitful tax return preparers. The vast majority of tax professionals provide honest, high-quality service. There are some dishonest preparers who set up shop each filing season to perpetrate refund fraud, identity theft and other scams.

Fake Charities: Be on guard against groups masquerading as charitable organizations to attract donations from unsuspecting contributors. These fake charities often have similar names to familiar or nationally known organizations. Contributors should take a few extra minutes to ensure their hard-earned money goes to legitimate and currently eligible charities. The IRS has the tools taxpayers need to check out the status of charitable organizations.

Inflated Refund Claims: Taxpayers should be on the lookout for anyone promising inflated refunds. Anyone who asks taxpayers to sign a blank return, promises a big refund before looking at their records or charges fees based on a percentage of the refund is likely running a scam. Fraudsters use flyers, advertisements, phony storefronts and word of mouth via community groups where trust is high to find victims.

Excessive Claims for Business Credits: Avoid improperly claiming the fuel tax credit, a tax benefit generally not available to most taxpayers. The credit is usually limited to off-highway business use, including use in farming. Taxpayers should also avoid misuse of the research credit. Improper claims often involve failures to participate in or substantiate qualified research activities and/or satisfy the requirements related to qualified research expenses.

Falsely Padding Deductions on Returns: Taxpayers should avoid the temptation to falsely inflate deductions or expenses on their returns to pay less than what they owe or potentially receive larger refunds. Think twice before overstating deductions such as charitable contributions and business expenses or improperly claiming credits such as the Earned Income Tax Credit or Child Tax Credit.

Falsifying Income to Claim Credits: Don’t invent income to erroneously qualify for tax credits, such as the Earned Income Tax Credit. Taxpayers are sometimes talked into doing this by con artists. Taxpayers should file the most accurate return possible because they are legally responsible for what is on their return. This scam can lead to taxpayers facing large bills to pay back taxes, interest and penalties. In some cases, they may even face criminal prosecution.

Abusive Tax Shelters: Don’t use abusive tax structures to avoid paying taxes. The IRS is committed to stopping complex tax avoidance schemes and the people who create and sell them. The vast majority of taxpayers pay their fair share, and everyone should be on the lookout for people peddling tax shelters that sound too good to be true. When in doubt, taxpayers should seek an independent opinion regarding complex products they are offered.

Frivolous Tax Arguments: Don’t use frivolous tax arguments to avoid paying tax. Promoters of frivolous schemes encourage taxpayers to make unreasonable and outlandish claims even though they have been repeatedly thrown out of court. While taxpayers have the right to contest their tax liabilities in court, no one has the right to disobey the law or disregard their responsibility to pay taxes. The penalty for filing a frivolous tax return is $5,000.

Offshore Tax Avoidance: There has been a recent string of successful enforcement actions against offshore tax cheats and the financial organizations that help hide money and income offshore. Taxpayers are best served by voluntarily reporting their tax-filing responsibilities. The IRS offers the Offshore Voluntary Disclosure Program to enable taxpayers to catch up on their filing and tax obligations.

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