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Current Issues Affecting Your Money

Current Issues Affecting Your Money

Beware Tax Scams

Beware Tax Scams

Tax season creates a lot of opportunities for fraudsters to take advantage of consumers. That’s why the IRS works to raise consumer awareness and releases a list of prevalent tax scams called the “dirty dozen” each year. Here’s a summary of this year’s top tax scams:

  • Identity Theft – One form of identity theft occurs when a thief uses someone else’s personal information to file a tax return and claim a refund. Protecting your personal information, including your social security number, is key to preventing identity theft.
  • Pervasive Telephone Scams – Fraudsters frequently make calls pretending to be from the IRS in order to get personal information or even money from consumers. If you receive such a call, you should hang up and call the IRS directly to ensure you’re speaking to a legitimate representative.
  • Phishing – Scammers may send e-mails that look legitimate, but the IRS will never contact you by e-mail with a request for personal or financial information. If you receive such a request by e-mail do not respond.
  • Inflated Refunds – Thieves often pretend to be tax preparers, promising large tax refunds. Be wary of tax preparers who make big claims and choose your preparer carefully.
  • Return Preparer Fraud – Dishonest tax preparers may victimize customers, stealing identities or creating refund fraud. Again, choose a tax preparer carefully. Legitimate preparers sign returns and have an IRS preparer tax identification number.
  • Hiding Income Offshore – There are rules for reporting assets kept overseas. Foreign accounts should not be used for the purpose of “hiding” income from the IRS. If you have offshore accounts, make sure you’re following the rules.
  • Impersonation of Charitable Organization – Scammers use a variety of tactics that include pretending to be a charity. They may contact consumers in attempts to get money or personal information. If you’re considering making a donation before tax time be sure that you give to a legitimate charitable organization.
  • False Income, Expenses, or Exemptions – Your tax return needs to be accurate in terms of your income, expenses, and exemptions. There are serious consequences for claiming income you didn’t earn or expenses you didn’t pay.
  • Frivolous Arguments – Individuals are sometimes encouraged not to file a tax return or pay taxes based on what the IRS calls “frivolous arguments.” For example, “the filing of a tax return is voluntary.” However, there can be significant consequences for invoking these frivolous arguments.
  • Falsely Claiming Zero Wages of Falsified 1099 Forms – Another form of fraud is using IRS information forms (like Form 1099) to reduce your tax liability. You shouldn’t participate in such a scheme yourself or allow someone to do so on your behalf.
  • Abusive Tax Structures – Beware of schemes that promise to eliminate or substantially reduce your tax liability, doing your homework before participating. Some such arrangements constitute tax evasion.
  • Misuse of Trusts – Trusts can be a really useful financial tool, but they can also be misused. For information on the proper use of trusts you should contact a financial professional.

Staying on the lookout for these scams can help keep you safe, and when in doubt you should consult a trusted tax advisor.

For more information on the dirty dozen tax scams or for IRS contact information, read the full IRS news release on irs.gov.


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