- 1 The IRS “Dirty Dozen” List
- 2 Phishing
- 3 Phone Scams
- 4 Identity Theft
- 5 Return Preparer Fraud
- 6 Inflated Refund Claims
- 7 Falsifying Income to Claim Credits
- 8 Falsely Padding Deductions on Returns
- 9 Fake Charities
- 10 Excessive Claims for Business Credits
- 11 Offshore Tax Avoidance
- 12 Frivolous Tax Arguments
- 13 Abusive Tax Shelters
- 14 How to Report Tax Scams
The IRS “Dirty Dozen” List
The IRS released their yearly Dirty Dozen tax scams for 2019.
This year’s “Dirty Dozen” list highlights a wide variety of schemes that taxpayers may encounter at any time, although many may peak during tax-filing season. The schemes run the gamut from simple refund inflation scams to complex tax shelter deals. A common theme throughout all: Scams put taxpayers at risk.
Taxpayers should be alert to potential fake emails or websites looking to steal personal information. The IRS will never initiate contact with taxpayers via email about a bill or tax refund. Don’t click on one claiming to be from the IRS. Be wary of emails and websites that may be nothing more than scams to steal personal information.
Phone calls from criminals impersonating IRS agents remain an ongoing threat to taxpayers. The IRS has seen a surge of these phone scams in recent years as con artists threaten taxpayers with police arrest, deportation and license revocation, among other things.
Taxpayers should be alert to tactics aimed at stealing their identities, not just during the tax filing season, but all year long. The IRS, working in conjunction with the Security Summit partnership of state tax agencies and the tax industry, has made major improvements in detecting tax return related identity theft during the last several years. But the agency reminds taxpayers that they can help in preventing this crime. The IRS continues to aggressively pursue criminals that file fraudulent tax returns using someone else’s Social Security number.
Return Preparer Fraud
Be on the lookout for unscrupulous return preparers. The vast majority of tax professionals provide honest, high-quality service. There are some dishonest preparers who operate each filing season to scam clients, perpetuate refund fraud, identity theft and other scams that hurt taxpayers.
Inflated Refund Claims
Taxpayers should take note of anyone promising inflated tax refunds. Those preparers who ask clients to sign a blank return, promise a big refund before looking at taxpayer records or charge fees based on a percentage of the refund are probably up to no good. To find victims, fraudsters may use flyers, phony storefronts or word of mouth via community groups where trust is high.
Falsifying Income to Claim Credits
Con artists may convince unsuspecting taxpayers to invent income to erroneously qualify for tax credits, such as the Earned Income Tax Credit. Taxpayers should file the most accurate tax return possible because they are legally responsible for what is on their return. This scam can lead to taxpayers facing large bills to pay back taxes, interest and penalties.
Falsely Padding Deductions on Returns
Taxpayers should avoid the temptation to falsely inflate deductions or expenses on their tax returns to pay less than what they owe or potentially receive larger refunds. Think twice before overstating deductions, such as charitable contributions and business expenses, or improperly claiming credits, such as the Earned Income Tax Credit or Child Tax Credit.
Groups masquerading as charitable organizations solicit donations from unsuspecting contributors. Be wary of charities with names similar to familiar or nationally-known organizations. Contributors should take a few extra minutes to ensure their hard-earned money goes to legitimate charities. IRS.gov has the tools taxpayers need to check out the status of charitable organizations.
Excessive Claims for Business Credits
Avoid improperly claiming the fuel tax credit, a tax benefit generally not available to most taxpayers. The credit is usually limited to off-highway business use, including use in farming. Taxpayers should also avoid misuse of the research credit. Improper claims often involve failures to participate in or substantiate qualified research activities or satisfy the requirements related to qualified research expenses.
Offshore Tax Avoidance
Successful enforcement actions against offshore cheating show it’s a bad bet to hide money and income offshore. People involved in offshore tax avoidance are best served by coming in voluntarily and getting caught up on their tax-filing responsibilities.
Frivolous Tax Arguments
Frivolous tax arguments may be used to avoid paying tax. Promoters of frivolous schemes encourage taxpayers to make unreasonable and outlandish claims about the legality of paying taxes despite being repeatedly thrown out in court. The penalty for filing a frivolous tax return is $5,000.
Abusive Tax Shelters
Abusive tax structures including trusts and syndicated conservation easements are sometimes used 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, taxpayers should seek an independent opinion regarding complex products they are offered.
How to Report Tax Scams
You should report all tax scams as provided on the IRS quick reference chart (re-posted below).
|… suspect or know of an individual or a business that is not complying with the tax laws on issues such as:
||Use Form 3949-A,
Information ReferralCAUTION: Do NOT use Form 3949-A to report the issues below
|Print the form and mail to:
or, order the form by mail or by calling the Tax Fraud Hotline recording at 1-800-829-0433. Note: we don’t accept alleged tax law violation referrals over the phone.
You may also send a letter to the address above instead of using Form 3949-A. Please include as much information as possible, such as these important points:
a. Name and Address of person or business you are reporting
*Although you are not required to identify yourself, it is helpful to do so. Your identity will be kept confidential.
Note: Submitters of Form 3949-A will not receive a status or progress update on the referral due to tax return confidentiality under IRC 6103.
|…suspect someone stole your identity and used your SSN for employment purposes or could use your SSN to file a tax return||Visit our page at Identity Protection: Prevention, Detection and Victim Assistance||Determine next steps by reviewing the information cited on the ‘Taxpayer Guide to Identity Theft‘ page.|
|…suspect fraudulent activity or an abusive tax scheme by a tax return preparer or tax preparation company||Use Form 14157**
**Form 14157-A (see below) may also be required
|You may complete the form online, print it and mail it to the IRS address on the form.
|…suspect a tax return preparer filed a return or altered your return without your consent and you are seeking a change to your account||Use Form 14157
|Send BOTH forms (Form 14157 and Form 14157-A) to the address shown in the Instructions for Form 14157-A.|
|…suspect an abusive tax promotion or promoter||Use Form 14242||The form can be mailed or faxed to the IRS address or fax number on the form.|
|…suspect misconduct or wrongdoing by an exempt organization or employee plan||Use Form 13909||Mail it to the address provided on the form.|
|…have information and want to claim a reward||Use Form 211||Mail it to the address in the Instructions for the form.|
|…suspect you received or are aware of fraudulent IRS e-mails and websites||Please let us know! See our Phishing web page.|