IRS Releases ‘Dirty Dozen’ Tax Scams [AUDIO]
The IRS compiles the list every year to make taxpayers aware of the common schemes they can encounter at any point during the year. But, many of these schemes peak during filing season as people prepare their tax returns.
The top scams include the following:
- Identity theft -- When a fraudster uses someone else's name and social security number to claim refunds.
- Phone scams -- Phone scams are gaining in popularity, where fraudsters call and pretend to be from the IRS. Some demand tax payments and even threaten arrest or other action if the person refuses.
- Phishing -- If you receive an email that claims to be from the IRS and asks for personal information, it's most likely a phishing scam. The IRS does not reach out to people through email, texts or social media.
- "Free money" -- Never trust fliers or ads that promise "free money" from the IRS or anyone offering a refund that sounds too good to be true.
- Return preparer fraud -- Know the person you use to prepare your taxes. Every tax preparer has an IRS Preparer Tax Identification Number. If the person you're using does not have one, that's a red flag.
- Hiding income offshore -- Never let anyone convince you it's a good idea to hide income overseas.
- Fake charities -- Scammers often try to create fake charities to fraudulently collect money, especially following a disaster. Before giving money to a charity, verify that the organization is legit.
- Inflating income and credits -- Boosting income or expenses to get bigger credits than you deserve can get you in trouble with the IRS.
- Frivolous arguments -- If you're trying to get out of paying taxes, arguments that won't work include the following: filing a tax return is voluntary, only gold-based money is taxable or your state isn't part of the United States. Anyone who tells you differently can't be trusted.
- Falsely claiming no income -- If you fall victim to schemes that convince you to falsely report your taxable income as zero, you could face a penalty of $5,000.
- Evading taxes -- Some untrustworthy investment advisers and tax preparers are creating and promoting complicated tax structures and shelters that clients can use to evade taxes. Don't fall for it.
- Abuse of trusts -- It's very common for scammers to recommend you transfer money into trusts to reduce your income and avoid paying taxes. There are appropriate uses of trusts, but the IRS has seen a growing number of people improperly use them.
"The Internal Revenue Service will never solicit for checking or savings account information or for your social security number via email, text or telephone, especially if you don't have a relationship with the IRS," said IRS spokesman Mark Green. "Only give your social security number out on a need-to-know basis. You really need to look into people's backgrounds, especially your tax preparer, to make sure the person you are trusting your information with is legitimate."
If a scam artist gets your social security number and files a tax return, there are steps you can take. First, contact your local police department, then reach out to your credit agency and put out a fraud alert, then contact the IRS.
For more information, visit IRS.gov.