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Two years ago my husband was a victim of tax-related identity theft. This is the Number 1 scam on the IRS list of “Dirty Dozen” tax scams. Updated annually, here is the 2016 list.Tax Scam
1. Identity Theft – tax returns filed using a stolen Social Security number to claim a fraudulent refund.
2. Phone Scams – aggressive threatening telephone calls from crooks claiming to be from the IRS. They demand immediate payment and often threaten arrest or deportation.
3. Phishing – fake e-mails and websites seeking financial or personal information. Scammers go to great lengths to make their communications look almost identical to those of the organization they claim to represent.
4. Return Preparer Fraud – unscrupulous tax return preparers who, according to the IRS, “set up shop each filing season to perpetrate refund fraud, identity theft and other scams that hurt taxpayers.”
5. Offshore Accounts – unreported bank accounts located outside of the United States set up to hide money, income and assets.
6. Inflated Refund Claims – claims for tax refunds to which the taxpayer is not entitled. The IRS says unscrupulous tax preparers lure clients with claims of inflated returns.
7. Fake Charities – groups masquerading as charitable organizations to collect money from unsuspecting people. Their names and websites often closely resemble those of legitimate non-profit organizations.
8. Falsely Padding Deductions on Returns – inflated deductions or expenses intended to reduce the amount of taxes actually owed or to falsely increase the amount of a refund.
9. Excessive Business Credit Claims – improper claims for business credits.
10. Falsifying Income to Claim Tax Credits – claims made for tax credits, such as the Earned Income Tax Credit, to which the taxpayer is not entitled. The IRS says this scam is often promoted by dishonest tax preparers promising people larger refunds.
11. Abusive Tax Shelters – Schemes such as using multi-layer transactions and moving money through limited liability companies, international business companies and other entities to hide who owns the money.
12. Frivolous Tax Arguments – arguments the IRS considers “frivolous.” Some taxpayers try this to avoid paying taxes.
How can you avoid falling victim to one of these scams?

  • Protect your information. Don’t give out your social security number to anyone unless absolutely necessary. Keep your tax information in a secure location. If you learn someone has filed a tax return using your identity, contact the IRS immediately.
  • Don’t respond to telephone calls or e-mails claiming to be from the IRS. The IRS always sends initial notifications through the mail and gives taxpayers the opportunity to appeal before sending payment.
  • Choose your tax preparer carefully. You want someone whose credentials you can verify, is available after the filing season, and has your refund deposited to your bank account, not the preparers’.
  • Verify a group asking for money is a legitimate charity. You can do this at the IRS website, Exempt Organizations Select Check.
  • If it sounds too good to be true, it probably is.

You are responsible for all information on your tax return, even when it is prepared by someone else. Although you may have no idea fraud has been committed on your return, you can be subject to penalties, interest, and, depending on the fraud, prosecution.
The best thing to do is to be honest and follow the IRS rules. Whether or not we like taxes, whether or not we agree with how our government spends the money it collects, taxes are there to provide the services we need to live in a civilized society.
In my husband’s case, we worked with the IRS to prove our real return was the correct one, and to put security measures in place. You can read about our experience in my blog post, “Tax Scam Hits Home.”
 
Image courtesy of Stuart Miles at FreeDigitalPhotos.net


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