IRS warns of ‘dirty dozen’

Published 2:24 pm Wednesday, March 17, 2010

The Internal Revenue Service has issued its 2010 “dirty dozen” list of tax scams. Tax schemes are illegal and can lead to imprisonment and fines for both scam artists and taxpayers. The IRS pursues and shuts down promoters of these and numerous other scams. The IRS urges taxpayers to avoid these common schemes:

Return Preparer Fraud Dishonest return preparers can cause trouble for taxpayers who fall victim to their ploys. Such preparers derive financial gain by skimming a portion of their clients’ refunds, charging inflated fees for return preparation services and attracting new clients by promising refunds that are too good to be true.

Hiding Income Offshore The IRS aggressively pursues taxpayers involved in abusive offshore transactions as well as the promoters, professionals and others who facilitate or enable these schemes.

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Phishing Phishing is a tactic used by scam artists to trick unsuspecting victims into revealing personal or financial information online.

Filing False or Misleading Forms The IRS is seeing various instances where scam artists file false or misleading returns to claim refunds that they are not entitled to.

Nontaxable Social Security Benefits with Exaggerated Withholding Credit The IRS has identified returns where taxpayers report nontaxable Social Security Benefits with excessive withholding.

Abuse of Charitable Organizations and Deductions The IRS continues to observe the misuse of tax-exempt organizations. Abuse includes arrangements to improperly shield income or assets from taxation and attempts by donors to maintain control over donated assets or income from donated property.

Frivolous Arguments Promoters of frivolous schemes encourage people to make unreasonable and outlandish claims to avoid paying the taxes they owe.

Abusive Retirement Plans The IRS continues to find abuses in retirement plan arrangements, including Roth Individual Retirement Arrangements (IRAs).

Disguised Corporate Ownership Corporations and other entities are formed and operated in certain states for the purpose of disguising the ownership of the business or financial activity by means such as improperly using a third party to request an employer identification number.

Zero Wages Filing a phony wage- or income-related information return to replace a legitimate information return has been used as an illegal method to lower the amount of taxes owed.

Misuse of Trusts For years, unscrupulous promoters have urged taxpayers to transfer assets into trusts. While there are many legitimate, valid uses of trusts in tax and estate planning, some promoted transactions promise reduction of income subject to tax, deductions for personal expenses and reduced estate or gift taxes.

Fuel Tax Credit Scams The IRS receives claims for the fuel tax credit that are excessive.