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IRS Zeroes In On Dirty Tax Scams In 2015

Each year, the IRS provides a list of what it calls a "dirty dozen" tax scams.  But in 2015, instead of simply announcing the list, the tax agency issued press releases on each scam.  Here's a rundown on this year's top offenders:

1.  Phone scams.  This is traditionally near the top of the list and often proliferates during tax-filing season.  Typically, someone will alter a caller ID number in order to make it look like it's the IRS on the phone.  Then the scammer is likely to threaten dire consequences if the victim doesn't immediately provide financial information and access to bank accounts.

2.  Phishing.  In a similar approach, criminals try to lure in victims through fake emails or websites and then gain access to personal information that's used to commit identity or financial theft.  The IRS never initiates contact by phone or email, so don't be fooled into giving a caller your personal information.

3.  Identity theft.  Scammers may try to steal your Social Security number so they can file a fraudulent tax return claiming a tax refund.  The IRS says it is continuing to step up its methods for identifying false returns and expanding partnerships with financial institutions to identity and stop bogus refunds.

4.  Tax return preparer fraud.  While the vast majority of tax return preparers are honest, there are still some people out there who may try to goad you into bad decisions to their benefit.  To protect yourself from unscrupulous preparers, look for recommendations from friends or for advisors in your area who have a good reputation.

5.  Unreported offshore accounts.  A common tax dodge is to hide income via offshore bank or brokerage accounts or nominee entities and then use debit or credit cards or wire transfers to tap the funds.  In a similar scam, taxpayers may use foreign trusts, employee-leasing schemes, private annuities, or insurance plans for the same purpose.  The IRS is ramping up efforts to thwart these schemes.

6.  Inflated refund claims.  Some scam artists pose as tax preparers during tax return season.  They lure in people by promising outlandish federal tax refunds, then collect big fees and disappear.

7.  False charities.  After major disasters, scammers may impersonate charities to pry money or private information from the concerned public.  Sometimes these thieves will reach out by telephone or email to solicit money or financial information.  Or they might contact disaster victims directly and claim to be working for the IRS.

8.  False 1099s and W-2s.  Filing a phony information return, such as a Form 1099 or W-2, may reduce your tax liability.  Some criminals provide self-prepared, corrected, or fake forms that improperly report taxable income as zero.  Another approach is to submit a statement rebutting wages and taxes reported by a third-party payer to the IRS.

9.  Abusive tax shelters.  These range from relatively simple structuring of abusive domestic and foreign trust arrangements to sophisticated strategies based on foreign financial secrecy laws.  Although a trust may be used for legitimate estate- and tax-planning purposes, the IRS could challenge questionable transactions.

10.  False income.  Some people may falsify income reported on their tax returns to claim refundable credits, such as the earned income tax credit, and sometimes their tax preparers are in on the scam.  Violators could be punished by having to pay restitution, interest, and penalties and might face criminal prosecution.

11.  Excessive claims for fuel credits.  The fuel tax credit generally is limited to off-highway business use or use in farming.  Yet while it isn't available to most taxpayers, some fraudulently claim the credit to inflate their refunds.

12.  Frivolous tax arguments.  The IRS and the courts may dismiss certain claims as being frivolous and a waste of time and money.  See the 2015 version of "The Truth about Frivolous Tax Arguments" provided to taxpayers. One illegitimate approach is to refuse to pay taxes on religious or moral grounds by invoking the First Amendment.

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