(Originally posted 03/22/2018)
Yesterday, March 21, the IRS released its “Dirty Dozen” list of tax scams for 2018. This is an annual event for the IRS with “Dirty Dozen” lists available online starting in 2014. The scams range from the obvious—like refund inflation—to the more covert—like offshore tax avoidance.
Of special concern in this age of identity theft are ploys to steal your personal information.
All taxpayers need to be aware that he/she/they are responsible for the information on their return, whether they prepare it themselves or pay someone else. Scams—even unwittingly—put taxpayers at risk for fines and even criminal prosecution.
As a Certified Public Accountant, we recommend that our clients and prospective clients take special note of the IRS caution on paid tax preparers.
Tax Preparer Fraud
As with previous lists, tax preparer fraud is a prominent concern on this year’s “Dirty Dozen”. With more than half (56%) of the nation’s taxpayers using third party preparers, it’s not surprising that tax preparer fraud comes in at number four on the list.
Here are some quick tips from the IRS to avoid tax payer fraud:
- Avoid fly-by-night preparers.
- Make sure the preparer has an IRS Preparer Tax Identification Number (PTIN). Paid tax return preparers are required to register with the IRS, have a PTIN, and include it on tax returns.
- Avoid preparers who base fees on a percentage of their client’s refund.
- Never sign an incomplete or blank tax form.
- Make sure the preparer will e-file your tax return. Paid preparers who do taxes for more than 10 clients generally must file electronically. The IRS has processed more than 1.5 billion e-filed tax returns and claims it’s the safest and most accurate way to file a return.
For more IRS suggestions for finding a reputable tax preparer, click here.
Complete “Dirty Dozen” List
- Phishing: Taxpayers should be alert to potential fake emails or websites looking to steal personal information. The IRS will never initiate contact with taxpayers via email about a bill or tax refund.
- Phone Scams: Phone calls from criminals impersonating IRS agents remain an ongoing threat to taxpayers.
- Identity Theft: Taxpayers should be alert to tactics aimed at stealing their identities, not just during the tax filing season, but all year long.
- Return Preparer Fraud: Be on the lookout for unscrupulous return preparers.
- Fake Charities: Groups masquerading as charitable organizations solicit donations from unsuspecting contributors.
- Inflated Refund Claims: Taxpayers should take note of anyone promising inflated tax refunds.
- Excessive Claims for Business Credits: For example, avoid improperly claiming the fuel tax credit, a tax benefit generally not available to most taxpayers.
- Falsely Padding Deductions on Returns: Think twice before overstating deductions, such as charitable contributions and business expenses.
- Falsifying Income to Claim Credits: Con artists may convince unsuspecting taxpayers to invent income to erroneously qualify for tax credits, such as the Earned Income Tax Credit.
- Frivolous Tax Arguments: Frivolous tax arguments may be used to avoid paying tax.
- Abusive Tax Shelters: Abusive tax structures are sometimes used to avoid paying taxes.
- Offshore Tax Avoidance: Successful enforcement actions against offshore cheating show it’s a bad bet to hide money and income offshore.
