Don't be victim of last-minute tax filing scams

Monday, April 11, 2011

We would normally have four days to get our income taxes filed, but thanks to Emancipation Day in the District of Columbia, we've been given until a week from today.

While most of us who have refunds coming back filed long ago, those with fewer deductions may be tempted to use the extra time to keep more of their hard-earned money away from Uncle Sam.

That's just good management of our resources, provided the methods they use follow the tax code.

Unfortunately, too many unscrupulous "advisers" are more than willing to take a cut of the money they are supposedly saving you in taxes.

Unless you're careful, you'll wind up paying the piper for their illegal song and dance.

One of the more prevalent scams involves offshore transactions foisted on tax payers by dishonest promoters.

So many have been taken by them, in fact, that in early February, the IRS announced a special voluntary disclosure initiative designed to bring offshore money back into the U.S. tax system and help people with undisclosed income from hidden offshore accounts get current with their taxes. The new voluntary disclosure initiative will be available through Aug. 31, 2011.

But there are numerous other ways crooks take advantage of taxpayers. Among them:

* Identity theft and phishing. Scammers may pose as an institution such as the IRS, or load spyware onto your computer, to obtain your information and file a fraudulent return in your name. If you think your personal information may have been stolen, call the IRS Identity Protection Specialized Unit at (800) 908-4490, or visit the IRS website. If you get a suspicious e-mail or are directed to a web address that does not begin with http:www.irs.gov, forward to to the IRS at phishing@irs.gov.

* Return preparer fraud -- Only use a reputable preparer that you know. A fraudster can cause you big trouble. Make sure you see your tax preparer's Preparer Tax Identification Number before submitting your return.

* Filing false or misleading forms -- Scam artists file false or misleading returns to claim refunds to which they are not entitled, using phony 1099 forms, for example. Don't give personal information to family or friends who may be falling prey to such scams.

* Frivolous Arguments -- Promoters encourage people to make unreasonable and outlandish claims to avoid paying the taxes they owe. While taxpayers have the right to contest tax liabilities in court, no 0ne has the right to disobey the law or IRS guidance.

* Nontaxable Social Security Benefits with exaggerated withholding credit. Taxpayers report nontaxable Social Security Benefits with excessive withholding, which results in no income reported to the IRS on the tax return. This type of scam could result in a $5,000 fine.

And those are just the tip of the iceberg of scams by creative criminal minds. Others include abuse of charities, disguised corporate ownership, "zero" wages, misuse of trusts, fuel tax credit scams and many others.

It's tough enough paying what we do owe to the IRS, but it's better than paying even more in fines, penalties or even jail time.

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