As a result of technological advancements, there are more and more tax scams that pop up each year. The IRS puts out an annual list of the “dirty dozen” tax scams that all taxpayers should know about. Here are the 12 most prevalent scams to be aware of for 2014 and a few tips on how to avoid getting entangled in some of them:
1) Identity theft: Identity theft occurs when the personal information of an innocent victim is stolen and often used to file fraudulent tax returns or make purchases. A good way to avoid identity theft is to be overly cautious about when you give out your personal information, Social Security Number, and any info that could give scammers the keys to turning your life upside-down.
2) Phone scams: Be cautious about who’s on the other end of the line when you get a suspicious phone call. If someone poses as an IRS agent or anyone looking for money, be sure to find out specific contact information for this person. Avoid giving out any personal information at all unless you are completely sure of who you are speaking with.
3) E-mail phishing scams: Be on-guard about any e-mails you receive. Some scammers may try to pose as IRS representatives by including “irs” or “.gov” in their e-mail addresses, even though they are fraudsters. Don’t respond to questionable messages with any personal information, and be leery of clicking on links that could contain viruses or spyware.
4) “Free money” promises from inflated tax refunds: Some scammers claim that they’re giving away “free money” or say they can get inflated tax refund payments for clients. Don’t buy into these scams. Many taxpayers do not receive a refund at all when they file their taxes, and an average refund is generally no more than a few thousand dollars for those with higher incomes.
5) Tax return preparer fraud: Scam artists sometimes pose as tax preparers and attempt to get gullible individuals to have them prepare their taxes. Know for certain that a certified preparer is handling your tax returns.
6) Keeping income in an offshore bank account: Some taxpayers try to hide money they’ve already earned or ongoing forms of income in offshore bank accounts, brokerage deals, or entities. IRS tax agents will spot any unordinary financial aspects of a tax return and may question this.
7) Charitable organization impersonation: Fraudsters occasionally pose as representatives from charities, particularly after major disasters in which taxpayers are more vulnerable. They try to get money, personal information, or financial information, or they’ll offer to file a casualty loss claim for someone – without even having the ability to do so legitimately.
8) Exaggerated income, expenses, or exemptions: IRS tax representatives who get returns on their desk that contain exaggerated income levels, expenses, exemptions, or other information may flag these returns. Some are from fraudsters looking to get bigger tax refunds.
9) Frivolous tax claims/arguments: Some scammers try making frivolous arguments or claims to the IRS about why they should not have to pay taxes. There are very few exceptions made for taxpayers to completely avoid tax filings, so many of these claims are false and could even lead to a major fine or imprisonment.
10) Claiming zero in wages: Pretending like you aren’t making taxable income to avoid paying taxes is not a good idea. In fact, it’s an illegal scam that some try to pull.
11) Abusive tax structures: Scammers use all kinds of sophisticated tactics to abuse the government’s tax system. It’s important for everyone to be vigilant of anything out of the ordinary just like tax agents are.
12) Misusing trusts: Some scammers encourage individuals to transfer money or assets into trusts in an attempt to reduce how much taxable income they have. This is also illegal.
1-800Accountant can assist you with all of your tax-filing needs to ensure you stay compliant and avoid any potential tax problems. To learn more, call 1-888-749-01171-888-749-0117 or visit www.1-800Accountant.
Image credit: The image of the “caution” sign is used with permission via the Creative Commons license through Flickr.