Sunday, February 19, 2012

IRS Warns About 12 Tax Scams

With tax season fast approaching, the United States Internal Revenue Service has released a list of twelve tax scams that lure consumers every year. Below are the tax scams that you should avoid, as advised by the IRS.

1. False tax refunds notice with the purpose of identity theft. If you believe you are a victim, contact the IRS Identity Protection Specialized Unit immediately.

2. Email phishing through false requests of personal or financial information via email. Report such unsolicited emails to The IRS can help you protect yourself from email scams.

3. Dishonest preparers who get client refunds or charge inflated fees. Always double check your hired preparer.

4. Choosing to hide offshore income. Avoid penalties and even prosecution by reporting them.

5. IRS tax scam through social security. Beware of ads promising free money.

6. False income and expenses reports. Being dishonest could get you extra taxes, interest, penalties and even prosecution.

7. Doing false Form 1099 refund claims.

8. Agreeing to promoters for frivolous arguments or unreasonable and outlandish tax claims.

9. Falsely claiming zero wages by using Form 4852 (Substitute Form W-2) or a "corrected" Form 1099 which tries to reduce taxable income to zero.

10. Misuse and abuse of charitable organizations and deductions.

11. Misrepresented corporate ownership. Third parties are improperly used to request employer identification numbers and form corporations to hide the real owners. Don't do it.

12. Misuse of trusts. Despite legitimate uses of trusts in tax and estate planning, some transactions promise deductions for personal expenses, cuts in estate or gift taxes, etc. Such trusts rarely deliver.

via ABC News