Tax Scams

Top Six Tax Scams

Courtesy of Andrew Stadler, EA

Each year the IRS release their “Dirty Dozen” tax scams. The top six scams are scams that we see here in Middle America every day.

#1 Tax Identity Theft: Tax Identity thieves use a legitimate taxpayer’s identity to fraudulently file a tax return and claim a refund. Last year over 400,000 Americans was victims of Tax Identity Theft. The IRS has no safety checks in place such as requiring someone to attach a copy of their government issued ID with their tax return. Anyone can purchase tax software at local office supplies store. It’s actually very easy to obtain someone SSN and off they go filling a tax return for you that you know nothing about. The IRS will issue your refund to someone else without even checking with you. For these unsuspecting Tax Identity theft victims you can still recover your tax refund but it is a painstaking and long process.

#2 Pervasive Telephone Scams: Callers pretending to be from the IRS in hopes of stealing money or identities from victims. The phone scams include many variations, ranging from instances from where callers say the victims owe money or are entitled to a huge refund. Some calls threaten arrest and threaten a driver’s license revocation. Sometimes these calls are paired with follow-up calls from people saying they are from the local police department or the state motor vehicle department.

#3 Phishing: Phishing is a scam typically carried out with the help of unsolicited email or a fake website that poses as a legitimate site to lure in potential victims and prompt them to provide valuable personal and financial information. Armed with this information, a criminal can commit identity theft or financial theft. The IRS does not initiate contact with taxpayers by email.

#4 False Promises of “Free Money” from Inflated Refunds: Scam artists routinely pose as tax preparers during tax time, luring victims in by promising large tax refunds. Scam artists use flyers, advertisements, phony store fronts and even word of mouth to throw out a wide net for victims. Scam artists victimize false claims for the Earned Income Tax Credit (EITC), or the American Opportunity Tax Credit, among others.

#5 Return Preparer Fraud: About 60 percent of taxpayers will use a tax professional to prepare their tax returns. Some unscrupulous tax preparer prey on unsuspecting taxpayers and the result can be refund fraud or identity theft. It is important to choose carefully when hiring an individual or firm to prepare your return.

#6 False Income, Expenses or Exemptions: Another scam involves inflating or including income on a tax return that was never earned, either as wages or as self-employment income in order to maximize refundable credits. Claiming income you did not earn or expenses you did not pay in order to secure larger refundable credits such as the Earned Income Tax Credit could result in prosecution, repaying the erroneous refunds, including interest and penalties.

The IRS reminds all taxpayers that they are legally responsible for what’s on their returns even if it was prepared by someone else.

Be sure to hire a licensed tax professional, an Enrolled Agent, America’s Tax Expert who specializes in Individual and small business taxes.

Check the preparer’s qualifications -- Make sure your preparer is qualified. The states of IN and IL do not required Tax Preparers to be Licensed, and per IRS, over 60% of tax preparers

do not have any license credentials. There are two types of licensing – CPA, licensed by the state board of accountancy, and Enrolled Agents, licensed by US Dept. of Treasury.

Check the preparer’s history -- Check your preparer’s history by conducting your own research through various sources: Enrolled Agent www.inea.bizor CPA society www.incpas.org.