CARL WATTS & ASSOCIATES

February 16, 2015

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Scams to Watch Out
For This Year
The tax filing season is in full bloom so almost everybody has taxes on their minds, including tax criminals.

In an effort to protect you from becoming a victim to any scheme which might literally cost you your life savings, or even result in your prosecution and imprisonment if you knowingly participate in them, every year the IRS releases the “Dirty Dozen” tax scams.

This year, the IRS has also set up a special section on IRS.gov highlighting these 12 schemes for taxpayers.

True as it is that it looks very much like the same list every year, it is also true that tax criminals constantly improve their techniques and there are always new generations of taxpayers to be educated and warned against tax scams.

This 2015 tax season, phone scams and email phishing schemes are the top two of the "Dirty Dozen" tax scams list. Here is the complete list from the IRS.

Phone Scams: Aggressive and threatening phone calls by criminals impersonating IRS agents remains an ongoing threat to taxpayers. The IRS has seen a surge of these phone scams in recent months as scam artists threaten police arrest, deportation, license revocation and other things. The IRS reminds taxpayers to guard against all sorts of con games that arise during any filing season.


According to the Treasury Inspector General for Tax Administration (TIGTA), J. Russell George, nearly 3,000 American taxpayers paid over $14 million in total to the phone scammers. All calls have the same goal of persuading the taxpayer to make a payment to satisfy a so-called IRS debt via a pre-paid debit card or a wire transfer. If taxpayers refuse to make a payment, scammers threaten them with an arrest, loss of driver’s license, closure of business, or seizure of property.

Scammers are able to alter caller ID numbers to make it look like the IRS is calling. They use fake names and bogus IRS badge numbers. They often leave "urgent" callback requests. They prey on the most vulnerable people, such as the elderly, newly arrived immigrants and those whose first language is not English. Scammers have been known to impersonate agents from IRS Criminal Investigation as well.


You should always remember that the IRS will never:
  • Call to demand immediate payment, nor will the agency call about taxes owed without first having mailed you a bill.
  • Demand that you pay taxes without giving you the opportunity to question or appeal the amount they say you owe.
  • Require you to use a specific payment method for your taxes, such as a prepaid debit card.
  • Ask for credit or debit card numbers over the phone.
  • Threaten to bring in local police or other law-enforcement groups to have you arrested for not paying.

Phishing: You need to be on guard against fake emails or websites looking to steal personal information. The IRS will not send you an email about a bill or refund out of the blue. Don’t click on one claiming to be from the IRS that takes you by surprise. You should be wary of clicking on strange emails and websites. They may be scams to steal your personal information.

Identity Theft: You need to watch out for identity theft especially around tax time. The IRS continues to aggressively pursue the criminals that file fraudulent returns using someone else’s Social Security number.

Return Preparer Fraud: You need to be on the lookout for unscrupulous return preparers. The vast majority of tax rofessionals provide honest high-quality service. But there are some dishonest preparers who set up shop each filing season to perpetrate refund fraud, identity theft and other scams that hurt taxpayers. Return preparers are a vital part of the U.S. tax system. About 60% of taxpayers use tax professionals to prepare their returns.

Offshore Tax Avoidance: The recent string of successful enforcement actions against offshore tax cheats and the financial organizations that help them shows that it’s a bad bet to hide money and income offshore. Taxpayers are best served by coming in voluntarily and getting their taxes and filing requirements in order. The IRS offers the Offshore Voluntary Disclosure Program (OVDP) to help people get their taxes in order.

Inflated Refund Claims: You need to be on the lookout for anyone promising inflated refunds. You should be wary of anyone who asks you to sign a blank return, promise a big refund before looking at your records, or charge fees based on a percentage of the refund. Scam artists use flyers, advertisements, phony store fronts and word of mouth via community groups and churches in seeking victims.

Fake Charities: You should be on guard against groups masquerading as charitable organizations to attract donations from unsuspecting contributors. Contributors should take a few extra minutes to ensure their hard-earned money goes to legitimate and currently eligible charities. IRS.gov has the tools taxpayers need to check out the status of charitable organizations. Be wary of charities with names that are similar to familiar or nationally known organizations.


Hiding Income with Fake Documents: Hiding taxable income by filing false Form 1099s or other fake documents is a scam that taxpayers should always avoid and guard against. The mere suggestion of falsifying documents to reduce tax bills or inflate tax refunds is a huge red flag when using a paid tax return preparer. Taxpayers are legally responsible for what is on their returns regardless of who prepares the returns.

Abusive Tax Shelters: You should avoid using abusive tax structures to avoid paying taxes. The IRS is committed to stopping complex tax avoidance schemes and the people who create and sell them. The vast majority of taxpayers pay their fair share, and everyone should be on the lookout for people peddling tax shelters that sound too good to be true. When in doubt, you should seek an independent opinion regarding complex products that are offered.

Falsifying Income to Claim Credits: You should avoid inventing income to erroneously claim tax credits. Taxpayers are sometimes talked into doing this by scam artists. Taxpayers are best served by filing the most-accurate return possible because they are legally responsible for what is on their return.

Excessive Claims for Fuel Tax Credits: Taxpayers need to avoid improper claims for fuel tax credits. The fuel tax credit is generally limited to off-highway business use, including use in farming. Consequently, the credit is not available to most taxpayers. But yet, the IRS routinely finds unscrupulous preparers who have enticed sizable groups of taxpayers to erroneously claim the credit to inflate their refunds.

Frivolous Tax Arguments: Taxpayers should avoid using frivolous tax arguments to avoid paying their taxes. Promoters of frivolous schemes encourage taxpayers to make unreasonable and outlandish claims to avoid paying the taxes they owe. These arguments are wrong and have been thrown out of court. While taxpayers have the right to contest their tax liabilities in court, no one has the right to disobey the law or disregard their responsibility to pay taxes. The penalty for filing a frivolous tax return is $5,000.

Illegal scams can lead to significant penalties and interest for taxpayers, as well as possible criminal prosecution. IRS Criminal Investigation works closely with the Department of Justice to shutdown scams and prosecute the criminals behind them.

With all the scams and ID abuse it is more necessary than ever to file your tax return early to prevent a lot of these fraudulent issues from happening or to mitigate loss.

As a taxpayer, you should always remember that you are legally responsible for what is on your tax returns even if it is prepared by someone else.
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