Dirty Dozen Tax Scams; Part I

This is the first part of a two part series regarding the “Dirty Dozen” scams.

When filing your taxes, be careful to not fall into the “Dirty Dozen.”

“The Dirty Dozen represents the worst of the worst tax scams,” IRS Commissioner Doug Shulman said. “Don’t fall pretty to these tax scams. They may look tempting, but these fraudulent deals end up hurting people who participate in them.”

Hiding income in offshore accounts, identity theft, return preparer fraud, and filing false or misleading tax forms top the list for 2011.

Hiding Income Offshore

The IRS aggressively pursues taxpayers involved in abusive offshore transactions as well as the promoters, professionals and others who facilitate or enable these schemes. The reward in this type of activity is not greater than the risk.

Identity Theft and Phishing

Identity theft is one of the fastest growing scams in the United States. And when it comes to taxes, a criminal with someone else’s personal information can file a fraudulent tax return and collect a return.

Phishing is a tactic used by scam artists to trick unsuspecting victims into revealing personal or financial information online.

Return Preparer Fraud

Most preparers are professionals and provide honest and excellent services to their clients. However, there are some who make errors, sometimes intentional, and engage in fraud and other illegal activities. We strongly encourage you to sit down with your Liberty Tax® office and get to know the preparer and ask them about their training and become comfortable in our abilities to serve you. The IRS has set higher standards for the tax preparer community that will result in greater compliance with tax laws.

Filing False or Misleading Forms

It may be tempting to file forms for credits or other refunds that you are not entitled to and the IRS would like to strongly encourage against this action.

Frivoulous Arguments

A law is a law regardless of what an unethical tax preparer may encourage you to do. Please check out the list of frivolous legal positions.

Nontaxable Social Security Benefits with Exaggerated Withholding Credit

The IRS has identified returns where taxpayers report nontaxable Social Security Benefits with excessive withholding. This tactic results in no income which results in the IRS at your door.

-david rocci