IRS’s Dirty Dozen Tax Scams for 2012

Each year, the IRS compiles a list of tax scams as a way to warn taxpayers not to fall for them. Here are the top 5 on this year’s list:

1. Identity theft. Scammers obtain taxpayer filing information to submit a false tax return in order to receive a tax refund. The IRS has aggressively tried to combat this scam and, in 2011, protected more than $1.4 billion of taxpayer funds from getting into the wrong hands due to identity theft. Find more information at www.irs.gov/identitytheft.

2. Phishing. Here scammers send taxpayer email that purports to be from the IRS as a way to obtain personal information, again to receive tax refunds or obtain credit under the taxpayer’s identity. Remember that the IRS never contacts taxpayers by email and, what’s more, it already has all the personal information it needs.
3. Return preparer fraud. Questionable return preparers can rip off tax refunds and/or expose taxpayers to unpaid taxes. Check that the preparer has a PTIN (a special IRS-issued identification number).
4. Hiding income offshore. U.S. citizens and residents are taxable on their worldwide income. While keeping money in foreign bank accounts is not illegal, not reporting it and paying taxes on earnings from foreign accounts is improper (and can even be tax evasion). Check reporting requirements for foreign bank accounts and assets.
5. “Free money” from the IRS. Scammers inflate claims on returns to generate refunds. Beware of filing anything that is not true; you could be penalized up to $5,000 and you’ll be out the money paid to scammers for their “help.”

Source: IR-2012-23, 2/16/12