In 2014 the IRS began posting a yearly list of prevalent tax scams that taxpayers should be aware of when going to file their annual tax returns. Coined the “Dirty Dozen”, the list is updated annually and is a great quick reference for taxpayers. For 2018 the tax scams to be on the look out for are as follows:
The IRS’ “Dirty Dozen” Tax Scams of 2018
Phishing is a method of scamming where the scammer makes fake emails or websites that look official, but in fact are malicious attempts at stealing taxpayer personal information. Taxpayers should be aware that the IRS will NEVER initiate contact with taxpayers via email regarding a bill or tax refund. Report any suspected phishing attempts to firstname.lastname@example.org.
Taxpayers should be wary of any phone call where the caller is representing to be an IRS agent. Despite progress made in breaking up the networks that enable these scam calls, the IRS has seen a surge of these phone scams in recent years. Con artists will often threaten taxpayers with police arrest, deportation and license revocation.
Remember the IRS will always initiate contact with an official letter. This letter will contain a case number, and sometimes a contact number. You can always use the contact numbers on the IRS website and refer your case number to the IRS agent if you suspect the correspondence itself might be fraudulent.
Taxpayers should be vigilant all year long in regards to tactics aimed at stealing their identities. While the IRS has made major improvements in detecting tax return related identity theft during the last two years, the agency reminds taxpayers that they can help in preventing this crime. Criminals that file fraudulent tax returns using someone else’s Social Security number are aggressively pursued by the IRS.
Return Preparer Fraud:
While the vast majority of tax professionals provide honest, high-quality service, taxpayers should on the lookout for unscrupulous return preparers.
Taxpayers should be wary of charities with names similar to familiar or nationally-known organizations. Contributors should take a few extra minutes to vet the charity they are donating to by using IRS.gov tools.
Inflated Refund Claims:
Related to return preparer fraud, taxpayers should be on the look out for anyone promising inflated tax refunds. If the preparer is asking you to sign a blank return and charges a percentage fee based on the return you receive, be very cautious.
Excessive Claims for Business Credits:
Taxpayers should void improperly claiming the fuel tax credit and avoid misusing the research credit. The fuel tax credit is generally limited to off-highway business use. While improper claims of the research credit often involve failures to participate qualified research activities or satisfy the requirements related to qualified research expenses.
Falsely Padding Deductions on Returns:
While tempting taxpayers should think twice before overstating deductions, such as charitable contributions and business expenses, or improperly claiming credits, such as the Earned Income Tax Credit or Child Tax Credit.
Falsifying Income to Claim Credits:
Always remember to file the most accurate return possible as you are legally responsible for what is on the return. A common scam is con artists convincing unsuspecting taxpayers to invent income to erroneously qualify for tax credits, such as the Earned Income Tax Credit. This scam can lead to taxpayers facing large bills to pay back taxes, interest and penalties.
Frivolous Tax Arguments:
Promoters of frivolous schemes encourage taxpayers to make unreasonable and outlandish claims about the legality of paying taxes despite being repeatedly thrown out in court. The penalty for filing a frivolous tax return is $5,000.
Abusive Tax Shelters:
While the vast majority of taxpayers pay their fair share, abusive tax structures are sometimes used to avoid paying taxes. Everyone should be on the lookout for people peddling tax shelters that sound too good to be true. The IRS is committed to stopping complex tax avoidance schemes and the people who create and sell them. When in doubt speak with a tax expert regarding the products being offered.
Offshore Tax Avoidance:
The successful Offshore Voluntary Disclosure Program (2009 -2018) show it’s a bad bet to hide money and income offshore. People involved in offshore tax avoidance are best served by coming in voluntarily and getting caught up on their tax-filing responsibilities. The IRS currently offers Streamlined Procedures for qualifying taxpayers looking to catch up on their tax returns and foreign disclosures.
Ask about our new client promotions today!
At Horizon Expat Tax we are happy to provide the following quality services:
- U.S. taxes for taxpayers worldwide
- U.S. Tax services for individuals immigrating to the U.S.
- Tax preparation and advisory for U.S. non-residents with U.S. reporting requirements (temporary U.S. work, U.S. rental property, etc)
- Small business tax compliance, advisory, and bookkeeping services
Any tax advice herein is based on the facts provided to us and on our interpretation of tax legislation as it reads at the time the advice is provided. Tax law is subject to continual change, at times on a retroactive basis and may result in incremental taxes, interest or penalties. We are not responsible for updating our advice for changes in law or interpretation after the date the advice is provided. Every tax situation is different. We are not responsible for the tax implications to any individual or entity that may act on this advice.