Top 12 IRS Tax Scams 2013 “The Dirty Dozen”By Coleman Jackson, P.C.Immigration & Tax Law Firm’s Site: www.cjacksonlaw.comPhone Numbers: English (214) 599-0431 | Spanish (214) 599-0432

Feb 13, 2014

The United States Internal Revenue Service (IRS) issues an annual list of tax scams which commonly pop up during a fiscal year to educate taxpayers for protecting their financial information and to make them aware of identity theft, phishing scams and several other IRS Tax Scams circulating that can cause financial mayhem. Here are the dirty dozen IRS tax scams of 2013!

IRS released following dirty dozen tax scams for 2013.(Release Date: March 26, 2013)

1. Identity Theft: This occurs when someone uses your personal information such as your Name, Social Security Number (SSN) or other personal identity information, without your permission. It is often used by scammers to fraudulently file tax returns and claim refunds.

If you receive a notice from IRS that more than one tax return has been filed under your name for the same tax period, the duplicate tax filing could be due to compromise of your identity. Your identity could be stolen, or misused by a former spouse, family member or business partner. If you believe that you are at risk of identity theft due to lost, stolen, or misused personal information, contact the IRS Identity Protection Specialized Unit at 800-908-4490 or you can visit the IRS’ special identity protection page.

2. Phishing: Phishing is usually carried out with unsolicited e-mails or fake websites to steal your personal and financial information. All you have to do is click on false links and your personal information could be compromised. Keep-in-mind, the IRS does not initiate contact with taxpayers by e-mail to request personal or financial information.

If you receive an unsolicited e-mail that appears to be from the IRS, Social Security Administration or other organization claiming to represent the United States government, you should report it by forwarding it to phishing@irs.gov. Some tax scammer’s also use snail mail; so be aware, when you receive regular mail that purports to be from the IRS too. If you are not sure, contact the IRS directly.

3. Return Preparer Fraud: Keep-in-mind, taxpayers are legally responsible for the information they represent on their tax return, even if the tax return is prepared by a third party professional, and even if you use tax-return preparation software. When you choose a tax preparer, make sure that (s) he has a valid IRS “Preparer Tax Identification Number” (PTIN). Paid tax return preparers must have a PTIN; and they must renew it annually. Tax return preparers must also record their PTIN on your tax return and sign your tax return as the paid tax return preparer. Avoid any paid tax return preparer who are not in compliance with IRS PTIN requirements.

4. Hiding Income Offshore: There are significant reporting requirements for offshore accounts and offshore assets, including FBAR (Report of Foreign Bank and Financial Accounts) and FATCA (Foreign Account Tax Compliance Act) filings. Those taxpayers with offshore assets over certain amounts and who do not properly report and timely disclose those offshore accounts are breaking the law and could face civil penalties and criminal prosecution including a fine of $100,000 or 50% of the account balance, whichever amount is higher and five years in prison. If you or your company, trust, partnership or other entity own offshore accounts or offshore assets, contact an offshore assets tax attorney now.

5. “Free Money” from the IRS & Tax Scams Involving Social Security: There is NOTHING like “free money” from the IRS. Be skeptical of flyers and advertisements promising you "free money" from the IRS. Scammers have been targeting low income and elderly people, often through community organizations, places of belief, and like trust environs where people may be more trusting; convincing them to claim credits they aren't entitled to, such as tax credits, tax refunds, and even Social Security rebates that doesn't exist. If you are a non-immigrant or immigrant college student, be aware of scammers and return preparers pushing tax credits that are only available to United States Citizens, such as, certain education tax credits. By claiming tax credits that are only available to U.S. citizens, you could be fraudulently claiming to be a United States citizen with serious immigration consequences.

These con artists often charge up-front fees and disappear without a trace before the claims are rejected by the IRS. And along with losing whatever they paid the scammer, victims could also end up owing the IRS a hefty $5,000 penalty for making intentional errors on their return.

6. Impersonation of Charitable Organizations: In the wake of disasters such as Hurricane Isaac and Hurricane Sandy, many scammers come out of the woodwork and solicit donations for bogus charities. They do this by soliciting funds by phone, text or e-mail or by using fake web sites.

Keep-in-mind, before giving money to a charity, search the IRS charitable organization database to verify that the organization is legitimate and that your donations will be tax exempted.

7. False/Inflated Income and Expenses: Refundable tax credits are refunded to you even if you did not owe a tax liability. Taxpayers may be encouraged to bump income amounts in order to maximize refundable credits. But doing this can get you in big trouble with the IRS. If you get caught, you'll have to return any refund you fraudulently received and pay interest and penalties on any amount owed, in some cases, you may be criminal prosecuted.

8. False Form 1099 Refund Claims: For years, scammers have touted a bogus theory that taxpayers can have access to cash through a redemption scheme. Here’s how the redemption scheme works:

Tax “professionals file a series of false tax forms in an effort to garner large fraudulent tax refunds. Promoters of the scheme tell customers that the federal government maintains “secret” accounts of money for its citizens. Taxpayers are advised that they can gain access to the funds and discharge their debts by issuing forms 1099-OID to their creditors.

Those claims are clearly false and filing such returns could subject you to financial penalties and criminal prosecution. If you are a lawful permanent resident, you could be subject to mandatory deportation if the loss to the government is $10,000 or more.

9. Frivolous Arguments: In frivolous schemes, the tax schemers make unreasonable and outlandish claims to avoid paying the taxes they owe. Frivolous tax arguments and tax positions on tax returns could subject you to substantial fines and penalties, including an immediate assessment of a $5,000 penalty. You could also be subject to criminal prosecution; and if you are a Green Card Holder, you could be put into removal proceedings.

The IRS has a list of frivolous tax arguments that should be avoided. Ignorance is no excuse for violation of the law.

10. Falsely Claiming Zero Wages: Promoters of falsely claiming zero wages schemes convince taxpayers that they can reduce their taxable income to zero by filing a phony federal Form 4852 (a substitute W-2 form) or a corrected Form 1099. This scheme is bogus and filing a return with these false forms may result in a penalty of $5,000 and criminal prosecution.

11. Disguised Corporate Ownership: The IRS is on the lookout for individuals, companies and entities that are hiding their true identities by using third parties, such as, forming corporations to make it difficult for the IRS to figure out who is the true owner. Hiding income or assets in an attempt to evade paying taxes or making certain disclosures can result in criminal prosecution.

12. Misuse of Trusts: There are many legitimate uses for trusts, which range from asset protection in estate planning to management of assets in the event of disability or incapacity. But, creating trusts for the purpose of tax evasion, including hiding income or generating bogus deductions, is an illegal use of a trust. It could be easier to inadvertently form a domestic or even offshore trust arrangement than you might think. To avoid getting caught up in an illegal trust arrangement, you should consult a competent tax advisor for the purpose of tax, business structuring, asset protection and estate planning.

This Presentation is written by the tax & immigration law firm of Coleman Jackson, P.C. for informational and educational purposes only. Our education presentations and blogs do not create an attorney-client relationship.

Coleman Jackson, PC Immigration & Tax Law Firm6060 North Central ExpresswaySuite 443Dallas, Texas 75206Law Firm Site: www.cjacksonlaw.com Main Line: 214-599-0431 ||| Spanish Line: 214-599-0432