IRS Dirty Dozen Tax Scams

Editor’s Note: Each year, the IRS comes out with a Dirty Dozen list with the most common tax scams and this year’s list is out. Many of them peak during tax season, so read on!

Here are the dirty dozen tax scams from the IRS this year:

1 – Phishing: Fake emails and websites used to obtain personal information are widespread. Know the IRS will never contact with your via email or web, so don’t click on emails or fake websites posing to be the IRS!

2 – Phone Scams:  IRS phone scams are an emerging way scammers target taxpayers for personal information. Scammers who impersonate the IRS call you to demand money, claiming that you owe them immediately. Unfortunately, many people fall for this scam. In fact, since October 2015 the IRS has identified thousands of victims who have collectively paid more than $26 million as a result of IRS phone scams.

3 – Identity Theft: Tax identity theft occurs when someone takes your personal information and uses it to file a fraudulent tax return in order to obtain a refund from the IRS. They have the refund sent to their own bank account. Then, when you go to file your tax return, the IRS may reject it because it sees your tax return as a duplicate.

4 – Return Preparer Fraud: The majority of tax pros offer honest, high-quality service — but not all. In fact, there are some dishonest tax professionals who exploit filing season as a time for refund fraud and identity theft.

5 – Fake Charities: There are some groups who claim to be charitable organizations (503(c)) to attract donations from people like you. The IRS suggests the following: “Look out for charities with names similar to familiar or nationally-known organizations. Contributors should take a few extra minutes to ensure their hard-earned money goes to legitimate and currently eligible charities.” Tax note: Legit nonprofits should use Form 990 as an informational tax return.

[Resource: Use this IRS tool to search for (legit) charitable organizations.]

6 – Inflated Refund Claims and Shady Practices: Watch out for tax preparers who claim to give you inflated refunds. Avoid tax preparers who ask you to sign a blank return, promise a big refund before looking at your refunds, or charge fees based on a percentage of the refund. Instead, a per-form pricing structure is the fair way to charge. Scammers hype up their services using ads (online and printed) to lure victims.

7 – Excessive Claims for Fuel Tax Credit: Avoid improperly claiming the fuel tax credit. (This credit is typically limited to off-highway business use.) Improper claims often involve failures to participate in or substantiate qualified activities and meet the requirements of qualified research expenses.

8 – Padding Deductions on Tax Returns: Claiming tax deductions like charitable contributions, business expenses, or credits like the Earned Income Tax Credit or Child Tax Credit all are classified as padding deductions. Falsifying deductions or expenses on your tax returns to pay less on your tax returns or receive larger refunds is a huge IRS no-no.

9 – Faking Income to Claim Credits: Inventing income to qualify for tax credits is a growing tax scam. Filing accurate information is critical — because you are legally held responsible for what’s on it! Failure to do so can lead to back tax fees, interest, penalties, and in the worst case criminal prosecution.

10 – Abusive Tax Shelters: Don’t use abusive tax structures to avoid paying taxes. When in doubt, seek the guidance of a tax professional.

11 – Frivolous Tax Arguments: Frivolous tax arguments to avoid paying tax is a IRS no-no. Promoters of such schemes encourage you to make unreasonable and outlandish claims, even though they have been repeatedly thrown out of court. (The penalty for filing a frivolous tax return is $5,000. )

12 – Offshore Tax Evasion: Offshore tax avoidance occurs when bank accounts and other financial dealings in another country is used to evade your U.S. tax obligation.

[Resource: The IRS offers the Offshore Voluntary Disclosure Program to enable people to catch up on their filing and tax obligations.]