The Internal Revenue Service (IRS) issued its annual “Dirty Dozen” list of tax scams, reminding taxpayers to use caution and protect themselves against these aggressive and evolving schemes throughout the year. This year’s 12 common tax scams include:

  1. Phishing: Phishing scams are typically carried through unsolicited emails or fake websites that prompt taxpayers to provide valuable personal and financial information. The IRS will never request personal or financial information via email, text message, social media or any other form of electronic communication.
  2. Phone Scams: Phone calls from criminals impersonating IRS agents remain an ongoing threat to taxpayers. There has been a surge of these phone scams in recent years as con artists threaten taxpayers with police arrest, deportation and license revocation, among other things. Always remember, the IRS will never threaten to immediately bring in local police or other law-enforcement groups, ask for credit or debit card numbers over the phone, call about an unexpected refund or demand that taxes be paid without giving taxpayers the opportunity to question or appeal the amount owed.
  3. Identity Theft: Taxpayers should be especially on the lookout for identity theft this time of year. Identity theft occurs when personal information such as your name, Social Security number or other identifying information is used without your permission. In many cases, an identity thief uses a legitimate taxpayer’s identity to fraudulently file a tax return and claim a refund.
  4. Return Preparer Fraud: Be on the lookout for unscrupulous return preparers. To avoid refund fraud, identity theft or other scams, taxpayers are encouraged to use trusted tax advisors, like those at Doeren Mayhew CPAs and Advisors, who sign the returns they prepare and enter their IRS Preparer Tax Identification Numbers.
  5. Fake Charities: Scam artists impersonate charitable organizations, especially one with names similar to familiar or nationally-recognized organizations, to attract donations from unsuspecting contributors. Take a few extra minutes to ensure your donation goes to legitimate and currently eligible charities. For security and tax record purposes, contribute to charitable organizations by check or credit card to document the gift.
  6. Inflated Refund Claims: Be alert to unscrupulous tax return preparers touting inflated tax refunds. Scammers typically ask taxpayers to sign a blank return, promise a big refund before looking at their records or charge fees based on a percentage of the refund. Taxpayers are legally responsible for what’s on their return, regardless if it was prepared by someone else, so protect yourself by enlisting a trusted tax preparer to file on your behalf.
  7. Excessive Claims for Business Credits: Don’t allow your tax preparer to improperly claim business credits such as the fuel tax and research credits, a tax benefit generally not available to most taxpayers. Frivolous tax claims may result in a $5,000 penalty.
  8. Falsely Padding Deductions on Returns: Avoid temptations of falsely inflating deductions or expenses to pay less than what you owe or potentially receive larger refunds. This could result in being subjected to criminal prosecution and repaying erroneous refunds, including interest and penalties.
  9. Falsifying Income to Claim Credits: Taxpayers are sometimes talked into inventing income to wrongly qualify for tax credits. This scam may result in facing large bills to pay back taxes, interest and penalties, and in some cases, may lead to criminal prosecution.
  10. Frivolous Tax Arguments: Promoters of frivolous schemes encourage taxpayers to make unreasonable and outlandish claims to avoid paying owed taxes. When in doubt, seek a trusted tax advisor regarding complex products they are offered. Taxpayers can face a variety of civil penalties, including criminal prosecution and a $5,000 fine.
  11. Abusive Tax Shelters: Take caution against preparers peddling tax shelters that sound too good to be true. Whether something is “too good to be true” is important to consider before buying into any arrangements that promise to “eliminate” or “substantially reduce” your tax liability. If an arrangement uses unnecessary steps or a form that does not match its substance, then it is an abusive scheme.
  12. Offshore Tax Avoidance: Avoiding taxes by hiding money or assets in unreported offshore accounts continues to be a major focus for the IRS. Several taxpayers have been identified as evading U.S. taxes by:
    • Hiding income in offshore banks, brokerage accounts or nominee entities, then using debit cards, credit cards or wire transfers to access the funds.
    • Employing foreign trusts, employee-leasing schemes, private annuities or insurance plans for the same purpose.

With the Offshore Voluntary Disclosure Program closing on Sept. 28, 2018, the taxpayers with offshore accounts are encouraged to take advantage of this option.

If you are in need tax assistance this filing season, contact Doeren Mayhew’s tax advisors.