One has to do with identity theft.
The list of the "Dirty Dozen Tax Scams" for 2012 has been released by the IRS. The agency says this list is to remind taxpayers to be use caution when preparing their tax returns because what may seem like an easy way to get a refund or avoid taxes could also be illegal.
One item on the list has to do with identity theft, a common problem in this high tech age. "We've been seeing a lot of cases of identity theft the last couple of years, and some of things you can do to prevent it is to make sure you keep your personal information private," says IRS spokeswoman Peggy Riley. "What we've been seeing is some fake tax returns being filed using people's tax identification numbers that may have been stolen in other ways." Riley says one of the clues that a taxpayer has been a victim of identity theft is more than one filing of a tax return by the same person, in which the taxpayer has reported wages from an unknown employer. If you feel you've been a victim of identity theft, contact the IRS.
Another "Dirty Dozen Tax Scam" is "phishing," where an individual receives an e-mail, purportedly from the IRS, asking for personal and financial information. "The IRS is not going to correspond by e-mail asking you for personal information," says Riley. In many cases, she says, the IRS will communicate with a taxpayer through the US Postal Service. If you've received one of these e-mail, Riley says forward them to the IRS so the agency can identify these scammers and shut them down. (firstname.lastname@example.org)
This year, the IRS estimates that more than 60% of taxpayers will use a tax professional to prepare their returns. While many are honest and provide good service to their customers, a few are unscrupulous. Riley says these individuals will skim off some of a client's refund, or, in order to attract more customers, will promise a higher refund than what they're entitled to. "Make sure you don't sign a blank return. You don't want to give them free reign to take anything they feel like taking on your tax return. You want to make sure you know everything that's on the return, and understand it. If there's something on there you don't understand, ask questions and have them to explain it to you," Riley says. She also reminds citizens to make sure the preparer signs their returns, putting on his or her tax identification number; and make sure you get a copy of your return. "Even though somebody prepares your return, you're ultimately responsible for whatever's on there," she says.
While many people may not make enough money to hide their income offshore, that's still listed as a "Dirty Dozen Tax Scam" for 2012. Riley says some people put their assets in overseas bank accounts, annuities, trusts or insurance plans, hoping it will not be taxed in the US. "However, if you have income that's hidden overseas, it's still taxable in the United States, and you need come forward and report that on your tax return," she says. The IRS says it works with the Department of Justice to prosecute Americans who transfer their incomes overseas in order to avoid taxes. "If we do find them, there's usually hefty penalties and interest that they will have to pay on this income. So it's to your advantage, if you have income hidden overseas, to come forward through one of our disclosure programs and report that income."
Another "Dirty Dozen Scam" is fliers and advertisements about "free" money from the IRS or scams involving Social Security. Some of these advertisements have been posted at churches and community centers, or the information is spread by word of mouth. Riley says individuals perpetrating these scams build up hopes for a big refund from the IRS by filing a return with little or documentation. "Actually, they target low income and elderly people who hear 'I'm going to get a refund.' They're more likely to fall for that," she says. When the claims are rejected by the IRS, the scammers have long since departed.
The IRS says other "Dirty Dozen Scams" are false and inflated income and expenses; false Form 1099 refund claims; frivolous arguments to avoid paying taxes; falsely claiming zero wages; abuse of charitable organizations and deductions; disguised corporate ownership; and misuse of trusts.