I may have covered the issue before, but the time is ripe for scammers and I'm a little overdue for a comprehensive review. On April 13, 2009, the IRS updated their "Dirty Dozen" Tax Scams list for 2009.
Phishing is when scam artists attempt to trick you into revealing financial information via Email. The Emails usually look official (see my previous post), but they're not. The IRS states that they NEVER initiate unsolicited e-mail contact with taxpayers about tax issues.
2. Hiding Income Offshore
This IRS has announced that they intend to aggressively pursue taxpayers and promoters involved in abusive offshore transactions. Don't expect to evade taxes by hiding income in offshore banks or by using offshore debit/credit cards or wire transfers.
3. Filing False or Misleading Forms
Don't use use false forms or file false or misleading information.
4. Abuse of Charitable Organizations and Deductions
Donating items to the Goodwill? Don't claim two old sweaters you donated are valued at $2,000. Basically, the IRS is keeping a close eye on non-cash donations to charitable organizations. If something looks fishy, they'll investigate.
5. Return Preparer Fraud
Be careful when choosing a Return Preparer. Some Return Preparers promote providing large refunds, but they don't tell you that they intend to take a big portion of your refund AND charge inflated fees to do it.
6. Frivolous Arguments
Quit the excuses. You have to pay your taxes, no matter what. Certain promoters encourage frivolous, unreasonable, and unfounded claims to avoid paying taxes owed. But if your file a tax return based on any of those positions, you could be subject to a $5,000 penalty.
7. False Claims for Refund and Requests for Abatement
The IRS states that many promoters are encouraging people to use Form 843, Claim for Refund and Request for Abatement, even though they have not previously filed tax returns or it does not apply to them. Participate in this scam, and you're committing Fraud. Don't request abatement of assessed tax without good reason.
8. Abusive Retirement Plans
The IRS announced that they're looking for transactions that taxpayers are using to avoid the limitations on contributions to IRAs and as transactions that are not properly reported as early distributions.
9. Disguised Corporate Ownership
Some people form corporations in certain states so they can disguise ownership of the business and/or financial activity. This allows them to underreport income, and make false. But the The IRS is cracking down on corporations this year, and they're working with state authorities to bring these businesses into compliance.
10. Zero Wages
Don't file phony wage or income related information return. People are using Form 4852 (Substitute Form W-2) or a "corrected' Form 1099 to reduce taxable income to zero.
11. Misuse of Trusts
According to the IRS, unscrupulous promoters have urged taxpayers to transfer assets into trusts. Such trusts rarely deliver the promised tax benefits and are being used primarily as a means to avoid income tax liability and hide assets from the IRS.
12. Fuel Tax Credit Scams
The IRS is receiving unreasonable claims for the fuel tax credit. People like farmers, that use fuel for off-highway business purposes, may be eligible for the credit. But you can't claim it if you simply use your car to get back and forth to work. Since fraud involving this credit is considered a frivolous tax claim, you run the risk of a $5,000 penalty if you're caught.
How to Report Suspected Tax Fraud Activity
People Email me often to ask how to report Tax Preparers and Accountants for Fraud. You can do any of the following:
- Use Form 3949-A, Information Referral
- Send a detailed addressed to the Internal Revenue Service, Fresno, CA 93888
Include specific info, like who is being reported, the activity being reported, how the activity became known, when the violation took place, the amount of money involved, and any other details you have. You won't have to self-identify, but it would be helpful. Your name and information will be kept confidential.
Being a snitch might get you paid! Fill Form 211, Application for Award for Original Information to apply for your reward after you reveal the scammer. Have a Happy and Safe Weekend!