It's tax-filing season, so you know what that means. It's also peak tax scam season.
In addition to collecting Americans' tax returns (and
money) this time of year, the Internal Revenue Service also keeps an eye out for tax scams.
While con artists sometimes do get creative, most tax crooks
tend to stick to tried-and-true scams. That's the case with IRS' annual list of tax skulduggery. All 12 scams cited this year made the agency's 2012 top 12 scam list.
The only change is that more fake charitable organizations have popped up, many in the wake of Hurricane Sandy.
After that super storm came ashore last October in New Jersey and New York, con artists took advantage of folks' goodwill to cheat them out of what they thought were much-needed, and tax deductible, charitable gifts.
Those despicable acts moved tax-related charity scams from 10th on the 2012 list to sixth on the 2013 Dirty Dozen tax scams.
Here, counting down to number one, are the five that this year finished just in front of the charity scams.
5. Social Security, IRS "free money"
Over the years, the IRS has seen a number of tax scams
involving Social Security.
Scammers have been known to lure unsuspecting taxpayers with
promises of non-existent Social Security refunds or rebates. In situations
where a taxpayer may really be due a credit or refund, scammers have used inflated
amounts on taxpayer returns to obtain a larger refund, which the con artist
then takes.
Social Security con artists often focus on churches and
community centers, where they can spread their scheme more easily through word
of mouth.
Similarly, crooks target others who usually make little money and don't have a filing requirement by promising they can get them free money from the IRS.
4. Offshore accounts
In recent years, the IRS has cracked down on individuals who
try to evade taxes by hiding income in foreign accounts. These so-called offshore
accounts can be in banks, brokerage accounts or nominee entities that utilized debit
cards, credit cards or wire transfers to access the funds.
Others tax schemes have employed foreign trusts,
employee-leasing schemes, private annuities or insurance plans for the same purpose.
While you may have legitimate reasons for maintaining
financial accounts abroad, you also must report those accounts to the IRS. If
you fail to meet offshore account reporting and disclosure requirements, you
could face significant penalties and fines, as well as possible criminal
prosecution.
3. Return preparer fraud
According to the IRS, around 60 percent of taxpayers use tax
professionals to prepare and file their tax returns.
Most return preparers provide honest tax service, but as in
any other business, there are also some who prey on clients. Questionable
return preparers have been known to skim off clients' refunds and charge
inflated fees for their services.
Choose carefully when hiring a tax preparer. Avoid preparers
who guarantee refunds or promise larger-than-normal tax refunds, charge a percentage
of your refund amount as the preparation fee or encourage you to enter false
information on your return.
2. Phishing
One way for ID thieves to get your personal data is through
phishing scams.
The con artists use unsolicited email messages or a fake
websites designed to look like legitimate ones to lure potential victims into
providing valuable personal and financial information. Once a crook has the information,
he can commit identity theft or financial theft.
Remember that the IRS does not initiate contact with
taxpayers by email to request personal or financial information. This includes
any type of electronic communication, such as text messages and social media
channels.
If you receive an unsolicited message that appears to be
from either the IRS or an organization closely linked to the IRS, such as the
Electronic Federal Tax Payment System, report it by sending it to phishing@irs.gov.
1. Identity theft
The biggest problem, once again, for taxpayers and the IRS is identity
theft. And it's getting worse.
The IRS says it is increasingly seeing identity thieves
looking for ways to use a legitimate taxpayer's identity and personal
information to file a false tax return and claim a fraudulent refund.
Identity thieves obtain personal information by many
different means, including stealing a wallet or purse or accessing information
provided to an unsecured Internet site. They look for personal information in
trash. They also pose as someone who needs information through a phone call or
e-mail.
Victimized taxpayers often don't discover the ID theft until
they file their own returns. That's when the legitimate filers get an IRS
notice that more than one return was filed in his or her name and any refund was
sent to someone else.
If you discover or even suspect your personal information
has been stolen and used to file a fraudulent tax return, contact the IRS
Identity Protection Specialized Unit (IPSU) toll-free at 1-800-908-4490.
Rest of 2013's scams: You can check out the rest of the 2013 Dirty Dozen tax scams at your leisure.
And remember, in all of these and other scam situations, if a tax
refund promise sounds too good to be true, it probably is.
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