Watch out for the Dirty Dozen! No, not the Lee Marvin-led squad of misfits — we’re talking about the worst tax scams out there.
Every year, the IRS releases its “Dirty Dozen” list, which details twelve common tax scams that taxpayers may encounter during the year. Although people can fall victim to these schemes at any time, many of them peak during filing season as people prepare their returns (often in a hurry).
And the 2017 Dirty Dozen Are…
Many of this year’s Dirty Dozen are old foes that have been making appearances on the list for years. However, there are some new entries for 2017 as well.
Without further ado, this year’s Dirty Dozen tax scams are:
- Phishing: “Phishing” is when criminals send communications that pretend to come from reputable companies and sources so they can capture victims’ personal information. The IRS will never initiate contact with taxpayers by email about a bill or refund, so never click on such an email that claims to be from the IRS or the comptroller.
- Phone Scams: The IRS has seen a surge of incidents in recent years in which criminals impersonate IRS agents over the phone. Often, these criminals threaten taxpayers with arrest, deportation, and license revocation to get them to give up their personal information. Remember, most (if not all) IRS correspondence comes in the form of a letter or certified letter.
- Identity Theft: After a noticeable absence last year, identity theft has reappeared on the list for 2017. The IRS is seeing more instances than ever in which someone files a fraudulent return using another person’s Social Security number. Make sure to protect your valuable personal information, especially your SSN.
- Return Preparer Fraud: Most tax professionals provide legitimate, high-quality services, but there are always some dishonest tax preparers who set up “fly-by-night” tax prep services so they can perpetrate various scams. Make sure you work with a reputable and established tax professional during tax season. (A note to tax professionals: The IRS is watching what you do. We are seeing an influx of practitioner discipline and audits in the last few months.
- Fake Charities: Some criminal groups will pretend to be charitable organizations to attract donations from unwary taxpayers. Often, these groups will have names that are very much like the names of notable and respected charities. You can use the tools available at IRS.gov to check out the status of any charitable organizations before you donate.
- Inflated Refund Claims: Watch out for anyone promising a refund that seems bigger than you’d expect or than anyone else is quoting, as this is often a warning sign for fraud. Other red flags include someone asking you to sign a blank return, promising a specific refund before looking at your records, or charging fees based on the percentage of a refund. Be especially careful with this one — our office has had to go to tax court or appeals to limit the liability for good taxpayers who have signed returns with inflated returns.
- Excessive Claims for Business Credits: Taxpayers need to avoid making improper claims for business tax credits. Two of the most commonly abused credits, according to the IRS, are the fuel tax credit and the research credit. Remember, the burden of proof is on the taxpayer. If you can’t support your claims with sufficient documentation, you will have a difficult time substantiating in an audit.
- Falsely Padding Deductions on Returns: Some people falsely inflate their deductions so they can pay less taxes than what they really owe, and the IRS is on the lookout for them. Deductions for charitable contributions and business expenses are two of the most abused deductions, and claiming credits like the Earned Income Tax Credit or the Child Tax Credit often attracts extra IRS scrutiny as well.
- Falsifying Income to Claim Credits: Some scammers will talk taxpayers into making up income so they can qualify for tax credits like the Earned Income Tax Credit. This scam can lead to taxpayers facing large bills for back taxes, interest, and penalties.
- Abusive Tax Shelters: A tax shelter is any strategy you employ to minimize your taxable income and therefore reduce the taxes you owe. Some unscrupulous tax preparers operate complex tax avoidance schemes that shelter large amounts of money which should be taxable. In general, watch out for any tax shelter that sounds too good to be true, especially if the arrangement comes from a “friend of a friend” or other source who isn’t a legitimate tax professional.
- Frivolous Tax Arguments: Promoters of frivolous tax avoidance schemes often encourage taxpayers to make absurd claims — for example, that they refuse to pay taxes based on religious or moral grounds. These arguments have been repeatedly struck down in court, and the IRS can impose a $5,000 penalty on anyone who files a frivolous tax return.
- Offshore Tax Avoidance: Hiding money from the IRS by moving it offshore is one of the most common and well-known tax scams. The IRS has had a recent string of successful enforcement operations that have broken up several offshore tax fraud operations. For people who have avoided paying taxes this way in the past, the IRS offers the Offshore Voluntary Disclosure Program as a way for them to come clean and catch up on their taxes without facing criminal penalties. Click here to read more about foreign bank and financial accounts.
Contact S.H. Block Tax Services If You’ve Fallen Victim to a Tax Scam
Many taxpayers who get caught up in the scams listed above aren’t looking to commit fraud of any kind. They just want help getting the best refund possible; unfortunately, they sometimes turn to the wrong sources and fall prey to tax con artists.
Hiding from your tax problems is a surefire way to make them worse. If you’re facing a tax liability issue because you’ve been the victim of a tax scam, contact the offices of S.H. Block right away, either by calling (410) 793-1231 or by filling out our easy online contact form.
During your free consultation, we can learn more about your unique situation and give you practical, compassionate advice about how to move forward and get started on the road toward resolving your tax controversy.
The content provided here is for informational purposes only and should not be construed as legal advice on any subject. Please read our full disclaimer here.
IRS summarizes “Dirty Dozen” list of tax scams for 2017. (2017, February 17). IRS.gov. Retrieved from https://www.irs.gov/uac/newsroom/irs-summarizes-dirty-dozen-list-of-tax-scams-for-2017