Unfortunately there is not a sci-fi theme video to spread the word on the Dirty Dozen (though there is a short YouTube video on the topic). Here are the most common tax scams the IRS wants you to be aware of during tax season, and for the rest of the year.
- Identity Theft. Not surprisingly, identify theft is at the top of the Dirty Dozen. The IRS has made fighting identity theft a top priority. Just today the IRS announced it would expand the program that allows law enforcement to obtain tax return data vital to investigating and prosecuting specific instances of identity theft.
- Phishing. Phishing is typically done through email, soliciting personal and financial information by impersonating the iRS or a related organization.
- Return Preparer Fraud. Some persons claiming to be tax professionals, may not really be "professional." If you are paying a preparer, they should be signing the return as a "Paid Preparer." But remember, the taxpayer (you) is responsible for the information on the tax return. Make sure the information is accurate.
- Hiding Offshore Income. Offshore accounts can be legitimate, but there are certain reporting requirements.
- "Free Money." If it sounds too good to be true, it probably is. These scams are often targeted at low-income individuals and the elderly.
- Fake Charitable Organizations. Make sure donations are made to IRS recognized charities to ensure you receive the charitable deduction. These types of fake charities often show up following a major disaster.
- False or Inflated Income and Expenses. Why would anyone inflate income or expenses? To get a larger refundable tax credit, like the Earned Income Tax Credit. Be aware of anyone telling you to do this, it could lead to criminal penalties .
- False Form 1099 Refund Claim. In this scam, scammers claim the IRS keeps secret accounts and that taxpayers can file a claim to that refund using Form 1099-OID. Don't claim deductions or credits you are not entitled to, and don't change or falsify documentation.
- Frivolous Arguments. Scammers try to convince you to make unreasonable arguments, like claiming Congress really doesn't have the power to tax citizens. Don't you think someone has already tried that argument (and lost)?
- Falsely Claiming Zero Wages. Scammers may recommend you file a substitute or corrected Form 1099 or Form W-2 to lower your wages. Again, this could lead to criminal penalties.
- Disguised Corporate Ownership. Scammers create various entities and hide income or create deductions between the entities. You guessed it, this can be criminal.
- Misuse of Trusts. Trusts can be legitimate, but many highly questionable transactions involving trusts claim to reduce income subject to tax or hide assets from creditors. Use caution with these types of trusts, and seek the assistance of a trusted professional.
For more information on how to avoid these scams, or to watch the low-budget YouTube video, see the IRS news release.