Scams, schemes and fraud - IRS says 'tis the season, tax-wise

Staff writerFebruary 20, 2014 

Tax time approacheth, and you’d best be aware of the various frauds and scams that attend the annual submission of your many happy returns.

Thanks to the IRS, here’s a list of the “Dirty Dozen Tax Scams for 2014,” released on Thursday.

1.Identity theft. It’s when someone else uses your personal information – name, Social Security number, bank or credit card data – without your permission. If you think you’re at risk, contact the IRS Identity Protection Specialized Unit at 800-908-4490.

2.Telephone scams. Now on the increase, this is the circumstance where a caller pretends to be from the IRS in hopes of parting you from your cash. Sometimes the caller promises a large refund, sometime the caller threatens some type of harm. Sophisticated versions utilize phony Caller ID numbers. If you get a suspicious call, hang up and contact the IRS at 800-829-1040.

3. Phishing. Victims are lured with unsolicited e-mail or a false website. Victims are asked for personal information. Don’t give it. See “Identity theft” above.

4. False promise of free money. Scam artists posing as tax preparers solicit your business with the promise of huge refunds. “They charge good money for very bad advice,” the IRS says. And the advice comes with a hefty fee. And in the end, you are still responsible for the actual taxes you owe.

5.Return preparer fraud. It’s best to confirm that your preparer has an IRS Preparer Tax Identification Number. For tips on choosing a preparer, visit

6. Hiding income offshore. It still doesn’t work. To avoid taxes, people will use vehicles including foreign trusts, employee-leasing schemes, private annuities or insurance plans. They hide their money in offshore banks, brokerage accounts or “nominee entities.” Since 2009, the IRS has collected “billions of dollars in back taxes, interest and penalties.” Pay what you owe and you won’t end up in the slammer.

7.Impersonation of charitable organizations. Following major disasters, scam artists arrive like locusts at a vegan picnic. To avoid problems, donate to recognized charities; check the bona fides of the supposed charity; don’t send cash; don’t give out personal information. Use common sense along with your common decency.

8.False income, expenses or exemptions. Unless you’re a true farmer, you probably don’t qualify for the fuel tax credit. Get real. Don't lie.

9.Frivolous arguments. Penalties await for those who make goofball claims. You know who you are. Claiming that Alexander Hamilton was high on hemp when he founded the Bank of the United States won't work.

10.Falsely claiming zero wages or using false Form 1099. Pitfalls surround Form 4852 when used to illegally reduce taxable income to zero. If you go ahead and file Form 1099-OID (Original Issue Discount) in order to claim a false refund, the IRS will begin asking some serious questions.

11.Abusive tax structures. IRS Criminal Investigation is aware that tax evaders sometimes use LLCs, LLPs and IBCs. If you don’t know what those letters stand for – that’s probably a good thing. When used to promulgate a scam, these schemes are typically complex and often catch the eyes of IRS investigators.

12. Misuse of trusts. Unscrupulous promoters lure taxpayers to transfer large financial assets into trusts – and yes, trusts can actually be the favored vehicle when making decisions concerning financial planning. Private annuity trusts and foreign trusts have their place, and that place could well be federal prison if used to avoid taxable obligations.


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