The spring tax season is a fraught period for U.S. taxpayers. It’s also a lucrative one for scam artists who prey on both unwary victims and complicit tax evaders.
“These schemes jump every year at tax time,” IRS commissioner John Koskinen said recently on the release of the agency’s “Dirty Dozen” list of tax scams that can take many different forms, some quite sophisticated.
Scams, which taxpayers may encounter throughout the year, can lead to significant penalties and interest and possible criminal prosecution, the IRS warned in a statement.
“We urge people to protect themselves and use caution when viewing emails, receiving telephone calls or getting advice on tax issues,” Koskinen said
Following are the 2014 Dirty Dozen Tax Scams.
1. Identity Theft
Unauthorized use of someone’s personal information to commit fraud or other crimes remains the IRS’s top concern this tax season. In many cases, an identity thief uses a legitimate taxpayer’s identity to fraudulently file a tax return and claim a refund.
The agency has a special section on IRS.gov dedicated to identity theft issues.
It said taxpayers who believe they are at risk of identity theft because of lost or stolen personal information can call the IRS Identity Protection Specialized Unit at 1-800-908-4490.
2. Pervasive Telephone Scams
Calls from scammers pretending to be IRS representatives in hopes of stealing money or identities from victims are increasing across the country, according to the agency. Callers may tell victims they owe money or are entitled to a big refund. They may threaten arrest, driver’s license revocation or, in the case of recent immigrants, deportation. Follow-up calls may come from people saying they are from the local police department or the state motor vehicle department.
The IRS said these scams are characterized by the following:
- Callers generally identify themselves with fake common names and surnames and provide false IRS badge numbers.
- Scammers may be able to recite the last four digits of a victim’s Social Security Number.
- They imitate the IRS toll-free number on caller ID to make it appear that the IRS is calling.
- Scammers sometimes send bogus IRS emails to victims to support their calls.
- Victims hear background noise of other calls being conducted to mimic a call site.
The IRS said recipients of calls from suspected scammers can call the agency at 1-800-829-1040 if they know or think they owe taxes and receive help with a payment issue—if there really is an issue.
Those who have no reason to think they owe taxes can report the incident to the Treasury Inspector General for Tax Administration at 1-800-366-4484.
Some scammers like to “phish,” using unsolicited email or a fake website to lure in potential victims and prompt them to provide valuable personal and financial information. They can then commit identity theft or financial theft.
The IRS noted that it did not initiate contact with taxpayers by any type of electronic communication to request personal or financial information.
Recipients of an unsolicited email that appears to be from either the IRS or an organization closely linked to the IRS, such as the Electronic Federal Tax Payment System, should forward the message to [email protected].
4. False Promises of ‘Free Money’ from Inflated Refunds
Scam artists routinely pose as tax preparers during tax time, promising large federal tax refunds or refunds people never thought they were due. They prey on people who do not have a filing requirement, such as low-income individuals or the elderly. Non-English speakers, who may or may not have a filing requirement, are favored targets.
Scammers dupe people into making claims for fictitious rebates, benefits or tax credits. Sometimes, they file a false return in a person’s name, and that person never knows that a refund was paid. They also victimize people with a filing requirement and due a refund by promising inflated refunds based on fictitious Social Security benefits and false claims for various credits.
The IRS said taxpayers who buy into such schemes can end up being penalized for filing false claims or receiving fraudulent refunds.
Victims sometimes lose benefits because of false claims being filed with the IRS that provided false income amounts. Frequently they are not given a copy of what was filed. And when the fraudulent refund is deposited into the scammer’s bank account, the con artist deducts a large “fee” before cutting a check to the victim—legitimate practitioners do not use this practice, the IRS said.
5. Return Preparer Fraud
Taxpayers are legally responsible for what is on their tax return even if it is prepared by someone else. For the 60% of taxpayers who the IRS said will use tax professionals this year, it is important to choose carefully when hiring an individual or firm to prepare a return.
Some unscrupulous preparers prey on unsuspecting taxpayers, and the result can be refund fraud or identity theft. The agency said taxpayers should use only preparers who sign the returns they prepare and enter their IRS Preparer Tax Identification Numbers.
Details on preparer qualifications and information on how and when to make a complaint are available at www.irs.gov/chooseataxpro.
6. Hiding Income Offshore