Although tax season has just started, the Internal Revenue Service (IRS) issued its annual list of most frequent scams taxpayers fall prey to. So, since IRS’ Dirty Dozen Tax Scams for 2012 list is in, let’s have a look at it, shall we?
Each year, the IRS updates its list to be current with the latest “innovations” in frauds, helping taxpayers protect their hard earned money. As Commissioner Douglas Stives states, “scam artists will tempt people in-person, on-line and by email with misleading promises about lost refunds and free money. Don’t be fooled by these”.
Before taking a hands-down look at the list, remember that if it sounds too good to be true, then it probably isn’t. Secondly, take IRS’ Commissioner Doug Shulman’s statement as an advice: “The IRS fights fraud by pursuing taxpayers who hide income abroad and by ensuring taxpayers get competent, ethical service from qualified professionals at home in the U.S.”.
Based on IRS’ Dirty Dozen Tax Scams for 2012 list here’s what to be on the lookout for: the return preparer fraud, hiding income offshore, phishing, filing false or misleading forms, nontaxable Social Security Benefits with exaggerated withholding credit, abuse of charitable organizations and deductions, frivolous arguments, abusive retirement plans, disguised corporate ownership, zero wages, misuse of trusts and the fuel tax credit scams.
On top of the list is the return preparer fraud which looks at taxpayers who can be enticed to fall for returns that seem too good to be true. Scammers take their own portion of the client’s refund and charges inflated fees for return preparation services. Plus, when people fall into their trap, these scam artists can easily assume the clients’ identities.
According to IRS, almost 404,000 people have been subjected to the return preparer fraud during the last two years. Terry Lemon, IRS director of communications, says that there’s “growth in this area. There’s no way around it. But I also think that we’ve gotten better at detecting it”.
To reduce the number of return preparer frauds, the IRS has started to implement a series of measures, including the obligation that all paid tax return preparers register with the IRS and obtain a preparer tax identity number.