The Internal Revenue Service (IRS) released its list of the "Dirty Dozen" tax scams in April. With summer in full swing, the agency has issued a reminder of five year-round scams taxpayers should avoid:
Hiding Income Offshore
Some taxpayers attempt to avoid U.S. income tax by hiding income in offshore banks and brokerage accounts or using other offshore options. The IRS has taken steps to stop this practice by instituting a voluntary disclosure initiative to bring offshore money back into the U.S. tax system. The latest voluntary disclosure initiative is available through Aug. 31, 2011.
Not to be confused with Phish (left), phishing is a tactic used by scam artists to trick victims into revealing personal or financial information online, often involving the use of phony email, websites and social media. IRS impersonation schemes are common during tax season.
The IRS has stressed that it never initiates unsolicited email contact with taxpayers about their tax issues. Suspicious scams should be fowarded to the IRS at firstname.lastname@example.org. (Phish photo by Dan Shinneman)
Return Preparer Fraud
Dishonest return preparers skim a portion of their clients’ refunds, charge inflated fees for services and attract new clients with false promises. Federal courts have issued hundreds of injunctions ordering individuals to cease preparing returns, while the Department of Justice has pending complaints against dozens of others.
Filing false or misleading forms
Scam artists file false or misleading returns to claim refunds to which they are not entitled. One scheme involves a taxpayer who seeks a refund by fabricating a return and falsely claiming the corresponding amount as withholding. Often, scammers use phony information returns to legitimize erroneous refund claims.
Promoters of tax schemes encourage people to make outlandish claims to avoid paying taxes. The IRS has released a list of frivolous legal positions that taxpayers should avoid, which have been thrown out of court.