IRS says to watch out for Tax Scams when preparing your Taxes
[Best Syndication News] The Internal Revenue Service (IRS) is reminding taxpayers to watch out for twelve different tax scams when preparing and filing your tax returns this year. The IRS calls these tax scams the “dirty dozen.” The IRS says that it is too good to be true, well it probably is and you should exercise caution when this seems to be the case. Tax schemes are illegal they warn and can lead to prison time and fines to both the scammer as well as the person filing the taxes.
Watch out and Avoid these Dirty Dozen Tax Scams:
1. Return Preparer Fraud – The tax person preparing the documents to file will save the taxpayer money, but in turn the tax preparer will charge an extra high fee for the service. If the numbers are not legitimate you are responsible for the information to be correct. Tax preparers might promise getting you a huge refund but often take more for their fee too. Ask for their preparer tax identification number (PTIN) and shop around for what their fees are before hiring them and ask for references from others that have used their services.
2. Hiding Income Offshore – The IRS promises to go after taxpayers that avoid paying their taxes by hiding their money offshore. They also go after those that promote this kind of tax avoidance. Offshore banks, brokerage accounts, foreign trusts, employee-leasing schemes, private annuities or insurance plans, foreign credit and debit card usage, and wire transfers to hide income and avoid taxes are a no-no. The IRS said that they have gained over 14,700 voluntary disclosures last year in their investigations fro tax avoidance with offshore accounts and schemes.
3. Phising – Watch out for people pretending to be IRS employees. Make sure that you are at the IRS website and not a phony one. Do not respond to emails, tweets as the IRS wouldn't contact you this way. Phishers are looking for personal information to steal a person's identity or bank funds. They might say that the person can get a tax refund but they need to provide their bank account to receive the funds. Instead they clean out your bank account.
4. Filing a False or a Misleading Form – Filing forms that are not true in order to gain refunds that the person would not be entitled. One common form is the Form 1099 Original Issue Discount (OID) form.
5. Nontaxable Social Security Benefits with an Exaggerated Withholding Credit - This tax fraud can result in a $5,000 penalty. The taxpayer reports nontaxable Social Security Benefits that has an excessive amount of withholding. This creates a no income, and most of the time these numbers are reported as incorrect. It sounds like a red flag for an audit.
6. Abusing Charitable Organizations and Deductions – They investigate abuse and misuse of tax-exempt organizations to hide assets or income. Donations might be higher that want the item is really worth and inaccurate appraisals.
7. Frivolous Arguments – The scam artist convince people to come up with unreasonable and outlandish claims to avoid paying the taxes that the person owes. The IRS says that a person can go to court to contest their tax liabilities, they might not be able to be excused from their tax debt.
8. Abusive Retirement Plans – Roth Individual Retirement Arrangements is something that the IRS looks into for those that avoid the limits on contributions to the IRAs. They also look for transactions that are not correctly reported as early distributions.
9. Disguised Corporate Ownership – The formation of a corporation and having a third party to request an employer identification number is a red flag. The corporation can be used to under report on income, create fictitious deductions. It is often used for illegal activities and financial crimes. The IRS works with state authorities to investigate these type of corporations.
10. Zero Wages – Filing a corrected income Form 4852 to lower the amount earned on a reported 1099 form. This often reduces the amount to a zero income tax bracket. While errors do occur and the form is legitimate when used appropriately, you can't lie about how much you made. If the IRS finds you cheating on reporting your 1099 income you could receive a $5,000 penalty.
11. Misuse of Trusts – The scam is to assemble a trust for the taxpayer to move assets into them. The IRS said that while in some cases these trusts are valid for tax and estate planning, many are being created to avoid income tax liability and hide assets from creditors, including the IRS.
12. Fuel Tax Credit Scams – While farmers and some other taxpayers can qualify for an fuel tax credit, many cannot use this credit. The person claims the fuel tax credit when they are not eligible and could be fined a $5,000 penalty for filing a frivolous tax claim.
If you have questions about paying your taxes or filing your tax forms. You should seek a professional accountant, but when in doubt check it out directly with the Internal Revenue Service. You can find information online, in printed materials, and you can even call to talk to an IRS employee who are trained to answer these questions. The IRS's website is at irs.gov.