If you file your federal income tax return early, good for you. If the Internal Revenue Service informs you that it received two tax returns with your name on them, you have been a victim of the most frequent kind of tax scam.
The IRS has just released its “Dirty Dozen” list for 2012. Not surprisingly, identity theft (our example above) is the most frequent type of tax fraud.
It’s something IRS officials say they’re working constantly to deter; the agency says last year it protected taxpayers from roughly $1.4 billion that identity thieves had been trying to steal.
In January, the IRS released the results of a nationwide crackdown on ID theft. The IRS joined forces with the federal Justice Department’s Tax Division and local U.S. Attorneys offices, targeting 105 people in 23 states. If you think your information has been stolen and used for fraudulent tax purposes, visit the special identity theft page at www.IRS.gov/identitytheft.
Number two on the Dirty Dozen list is phishing, the technique ID thieves often use to try to collect people’s personal information. Phony emails or fake websites might solicit information to “help increase your refund” or “provide necessary information.” The IRS does not initiate correspondence through email, and recipients should not respond to such solicitations.
Investigators also report cases of fraudulent activity on the part of some tax preparers. While most people in that business are scrupulously honest, some do try to cut corners and some flagrantly violate the law. Failing to sign or put a Preparer Tax ID number on your return, promising larger than normal refunds or demanding that you split the refund are all examples of unethical behavior by a tax preparer.
Some people who advertise as tax advisers are simply hucksters. They might claim they can get “free money” from the IRS or unusual benefits from Social Security. Other scammers may urge you to make outrageous claims to avoid paying taxes; while it’s within your rights to challenge a tax bill, you can’t simply disobey the law about paying taxes you owe.
Some citizens try to hide money in offshore accounts, despite two widely publicized efforts by the IRS to crack down on tax evaders. The agency said in January that its efforts so far have resulted in the collection of $4.4 billion and that those efforts are ongoing.
Other tax dodging schemes include filing false 1099 forms, or claiming income not received in an effort to get a refund to which the person is not entitled. Another scam is claiming zero income, in hopes of dodging all tax liability. Over-valuing one’s charitable contributions is yet another violation prompting IRS scrutiny.
Disguising the true ownership of corporations is another common tax scam.
The IRS and the states work to discourage such tactics and find out who really is on the hook for business taxes.
Rounding out the list is the misuse of trusts. IRS officials say the improper use of private annuity trusts and foreign trusts is on the rise, often due to promises of tax shelters which may not be realized. The IRS urges people to consult competent advisers before entering into trust arrangements.
For more, visit the Internal Revenue Service website, www.irs.gov and search “Dirty Dozen 2012.”
Consumer Forum is a collaboration of the Bangor Daily News and Northeast CONTACT, Maine’s membership-funded, nonprofit consumer organization. Individual and business memberships are available at modest rates. For assistance with consumer-related issues, including consumer fraud and identity theft, or for more information, write: Consumer Forum, P.O. Box 486, Brewer 04412, go to necontact.wordpress.com, or email firstname.lastname@example.org.