It’s tax season crunch time. Taxpayers have until April 18, this year, to file their state and federal income tax returns. And, as they search their files and piles around their homes for critical tax documents, another group also is losing no time to make the most of the season -- fraudsters.
For the third year, the Internal Revenue Service has put a spotlight on tax scams that aim to steal money and valuable information from taxpayers. These schemes happen all year, according to the federal agency, but scammers work overtime during tax season to take advantage of vulnerable taxpayers.
Anybody involved in these illegal shakedowns can face big fines and even jail time. Taxpayers also should know, according to the IRS, that they are legally responsible for the information in their tax return even if it was completed by another person.
Phishing: The IRS saw an uptick in phishing and malware activity during last year’s tax season as con artists attempt to confuse taxpayers by sending emails or launching websites that appear to be official IRS communication. In reality, they are simply attempts to con taxpayers into sharing their personal information. “Don’t be fooled by unexpected emails about big refunds, tax bills or requesting personal information,” said IRS Commissioner John Koskinen in a press release. “That’s not how the IRS communicates with taxpayers.”
Phone scams: The IRS also reports a boom in the number of phone calls where scammers impersonate IRS agents. They can be aggressive and even threaten taxpayers with arrest, deportation and license revocation. Since 2013, more than 10,000 victims have paid more than $54 million because of phone scams, according to the Treasury Inspector General for Tax Administration. To avoid being conned, know that the IRS generally initiates contact with taxpayers by mail, not phone call.
Identity theft: The good news is, thanks to new safeguards, the number of taxpayers reporting identity theft on federal tax returns dropped by more than 50 percent in 2016. The bad news is that fraudsters continue to prey on taxpayers, stealing vital personal and financial data.
Return preparer fraud: Most tax return preparers do good work. Some hang up a shingle to commit fraud. Choose your preparer carefully.
Fake charities: Look out for fake groups that appear to be charitable organizations. They are only after your money. The IRS offers tips to ensure the nonprofits you support are legitimate.
Inflated refund claims: Don’t let a con artist posing as a tax preparer trick you into claiming fake rebates, benefits or tax credits for an impossibly high refund. They user flyers, advertisements, phony store fronts or word of mouth to lure their victims, often the poor or elderly, according to the IRS.
Excessive claims for business credits: Walk away if a tax preparer suggests claiming a “fuel tax credit” or a “research credit.” Most taxpayers don’t qualify for either.
Falsely padding deductions: Never overstate deductions for charitable donations. Never ask for credits, such as the Earned Income Tax Credit or Child Tax Credit, if you’re not entitled to them. You could face stiff penalties and criminal prosecution.
Falsifying income to claim credits: Some taxpayers make up income so they can receive certain tax credits. If you’re caught, you could face big fines -- and even jail time.
Abusive tax shelters: These fake tax shelters appear to be a way for taxpayers to avoid paying what they owe. But, they can actually cost taxpayers more -- in penalties, back taxes, and interest, according to the IRS.
Frivolous tax arguments: Taxpayers can contest their tax bill in court, but don’t make “outlandish claims,” which are repeatedly thrown out of court, according to the IRS. The agency lays out some of the most common ones in its “The Truth about Frivolous Tax Arguments.”
Offshore tax avoidance: Since 2009, the IRS has collected nearly $10 billion in taxes from people who were hiding money or assets in offshore accounts.
Worried you might get caught up in a scheme? The IRS has more details about each of these tax season scams on its website.
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