IRS warns of ‘Dirty Dozen’ tax scams
MARTINSBURG — The Internal Revenue Service has started releasing this year’s top 12 scams targeting consumers known as “The Dirty Dozen.”
The annually compiled list features a variety of scams the agency says are common and that taxpayers could encounter anytime, but especially during peak filing season.
Phishing schemes lead the “Dirty Dozen” list of tax scams for 2017 and remain a major tax-time threat. The IRS warned taxpayers to watch out for fake emails or websites looking to steal personal information.
“Phishing” involves an attempt to obtain sensitive and confidential information — such as usernames, passwords and credit card details — by disguising the communication as a trustworthy source. The annual worldwide impact of phishing could be as high as $5 billion, according to the Third Microsoft Computing Safer Index Report released in February 2014.
State officials have continually stressed the importance of consumer vigilance.
“Scams are unfortunately a never-ending concern. Perpetrators are very slick in devising schemes to steal your money,” said Patrick Morrisey, Attorney General for West Virginia. “This can be especially prevalent during tax season. Taxpayers must be very cautious and never feel rushed to comply with a stranger’s demands. You must research and confirm the legitimacy of every recipient for whom you intend to send personal or financial information. These safeguards may take time, but they are crucial to protecting your identity and your hard-earned money.”
Phone scams also remain a serious threat. These are aggressive and threatening phone calls by criminals impersonating IRS agents and remain a major threat to taxpayers, according to the IRS.
The IRS has issued a filing season alert, warning taxpayers and tax professionals to watch out for identity theft at tax time and highlighted the crime as a recurring scam in the agency’s “Dirty Dozen” series.
Falsely Inflating Refund Claims is on the list of tax scams for 2017. The IRS warns taxpayers to be alert to unscrupulous tax return preparers touting inflated tax refunds.
Fake charities are also a concern on the IRS’ list of tax scams for 2017. The IRS has warned taxpayers about groups masquerading as charitable organizations to attract donations from unsuspecting contributors.
The IRS warned taxpayers to be on the lookout for unscrupulous return preparers, one of the most common “Dirty Dozen” tax scams seen during tax season.
Last year, offshore tax avoidance was highlighted. 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, according to the IRS. Taxpayers are best served by coming in voluntarily and getting caught up on their tax-filing responsibilities. The IRS offers the Offshore Voluntary Disclosure Program (OVDP) to enable people to catch up on their filing and tax obligations.
Falsely padding deductions on returns was also mentioned in the list. Taxpayers should avoid the temptation of falsely inflating deductions or expenses on their returns to under pay what they owe or possibly receive larger refunds. The IRS says to think twice before overstating deductions such as charitable contributions and business expenses or improperly claiming such credits as the Earned Income Tax Credit or Child Tax Credit.
Excessive claims for business credits also made the list. The IRS urges filers to avoid improperly claiming the fuel tax credit, a tax benefit generally not available to most taxpayers. The credit is generally limited to off-highway business use, including use in farming. Taxpayers should also avoid misuse of the research credit. Improper claims generally involve failures to participate in or substantiate qualified research activities and/or satisfy the requirements related to qualified research expenses.
Falsifying income to claim credits were listed in 2016. The agency urged filers to not invent income to erroneously qualify for tax credits, such as the Earned Income Tax Credit. Taxpayers are sometimes talked into doing this by scam artists, according to the IRS. Taxpayers are best served by filing the most-accurate return possible because they are legally responsible for what is on their return. This scam can lead to taxpayers facing big bills to pay back taxes, interest and penalties. In some cases, they may even face criminal prosecution.
The 2016 list also mentioned abusive tax shelters. The IRS urges taxpayers to not use abusive tax structures to avoid paying taxes. According to the IRS, the agency is committed to stopping complex tax avoidance schemes and the people who create and sell them. When in doubt, taxpayers should seek an independent opinion regarding complex products they are offered.
Frivolous tax arguments were common, according to the IRS. Don’t use frivolous tax arguments in an effort to avoid paying tax, the agency said. Promoters of frivolous schemes encourage taxpayers to make unreasonable and outlandish claims even though they are wrong and have been repeatedly thrown out of court, according to the agency.
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, according to the IRS. The penalty for filing a frivolous tax return is $5,000.
