Always vigilant to the endless raft of tax shenanigans going on out there, IRS has released its latest list of favorites – warning taxpayers to be alert to the most egregious potential problems lurking.
- Identity theft – This is the biggie. IRS continues to hunt down and prosecute the crooks filing false tax returns using other folks’ social security numbers to secure refunds to which the bad guys are not entitled.
- Phone scams – We’ve even received one of these – a call from a bad guy impersonating a real Revenooer claiming that unless we pay (a phony “unpaid tax” amount) arrest and other bad things awaits us.
- Phishing – Though IRS never communicates with taxpayers about unpaid balances, the bad guys do, in an effort to steal personal information. IRS warns you to be wary of strange emails and websites that are likely nothing more than invitations which, if accepted, will expose your personal information to theft.
- Return preparer fraud – Deal with reputable professionals only, and beware of preparers, for example, who may pop up with a store front near you, promising all kinds of tax goodies if you engage them.
- Offshore tax avoidance – IRS has gotten pretty good at nipping this one in the bud, but some folks still think they can hide assets and/or income abroad, keeping IRS at bay. This can be really bad medicine and folks who play this game will find their pocket book much lighter if/when IRS catches up, not to mention the possibility of a stay in the slammer.
- Inflated refund claims – Stay away from any preparer who asks you to sign a blank return, promises a big refund before even reviewing your records, or charges fees based on a percentage of your refund!
- Fake charities – Make sure your donations go to only legit charities and not ones with “sound alike” names to those we all know and love. If in doubt, check with IRS first (www.irs.gov) who keeps a list of all charities which are truly tax exempt organizations.
- Falsely padding deductions on returns – this one speaks for itself. Obviously a “no-no.”
- Excessive claims for business credits – The fuel tax credit and research credit are high on IRS list of those credits which often are used by cheaters.
- Falsifying income to claim credits – IRS warns you not to “invent” income so you can incorrectly qualify for such items as the earned income tax credit!
- Abusive tax shelters – This one, too, used to be of more concern to IRS, which has become pretty good at shutting down these tax avoidance schemes, and even putting some of the folks pushing them in the clink. If a peddler tries to sell you on one of these, and it “sounds too good to be true,” the likelihood is that it is.
- Frivolous tax arguments – Believe it or not, there are still some promoters out there who try to encourage taxpayers to make unreasonable and outlandish claims (often based on phony constitutional arguments, or claiming that the income tax law is illegal) in an effort to reduce one’s tax liability. Amuse yourself by reading about these blokes and their ridiculous arguments, but that should be as far as you go. And by the way, the penalty for filing a frivolous return is $5,000.
CONSULT YOUR TAX ADVISOR – This article contains general information about various tax matters. You should consult your CPA regarding the implications to your own particular situation.
Jeff Quinn, the author of this article, is a CPA, recently retired from Ashley Quinn, CPAs and Consultants, Ltd., with offices in Incline Village and Reno. He welcomes comments at firstname.lastname@example.org.