Taxpayers must always be vigilant regarding the legality of an action related to the filing of their taxes. This includes whether they are filing an IRS form, calculating income, claiming a deduction, characterizing assets, preparing a tax return, or communicating with a third party claiming to be a tax advisor or employee or agent of the IRS. Taxpayers must not knowingly or unknowingly participate in any scams that involve the calculation, filing, and payment of their taxes or the results may be devastating. Here are some new and old tax scams of which all taxpayers must be aware:
- Phishing
This scam starts with a fake email asking tax professionals to update their IRS e-services portal information and Electronic Filing Identification Numbers (EFINs). The links that are provided in the bogus email to access IRS e-services appear to be a phishing scheme designed to capture usernames and passwords. This email is not generated by the IRS e-services program or any other IRS program. Disregard this email and do not click on the links provided.
Another scam involves phone calls that target taxpayers, including recent immigrants, with the callers falsely claiming to be IRS employees. Fake names and bogus IRS identification badge numbers are used. These callers may actually alter someone’s caller ID to make it appear that the IRS is calling. In most of the calls, the caller becomes threatening, hostile and insulting. If the phone isn’t answered, the scammers often leave an “urgent” callback request.
The caller uses collection agency tactics telling targeted victims that they owe money to the IRS which must be paid immediately through a debit card or wire transfer. Victims refusing to cooperate are threatened with arrest, deportation or suspension of a business or driver’s license. Alternatively, victims may be told they have a refund due to deceive them into sharing private information.
Note that the IRS will never: 1) call to demand immediate payment, nor will the agency call about taxes owed without first having mailed you a bill; 2) demand that you pay taxes without giving you the opportunity to question or appeal the amount they say you owe; 3) require you to use a specific payment method for your taxes, such as a prepaid debit card; 4) ask for credit or debit card numbers over the phone; or 5) threaten to bring in local police or other law-enforcement groups to have you arrested for not paying.
- Return preparer fraud
Dishonest tax preparers promise large refunds, which either don’t happen or are based on fraudulent returns. Their scams include “skimming” clients’ refunds or charging inflated fees.
- Trust misuse
Based upon bad advice, taxpayers transfer assets into special trusts thinking they offer tax benefits but don’t.
- Roth IRAs
In this tax scam, properties or common stock are moved into the shelter of a Roth Individual Retirement Account (IRA) at way below their true value, circumventing the annual contribution limit.
- Charitable deductions
In this tax scam, a taxpayer moves assets or income to a supposedly tax-exempt organization like a charity, but retains control over those assets, which is not permitted by federal law. Another common and well-known old scam is the overvaluation of property donated to charities.
- Disguised corporate ownership
This is where taxpayers form a shell company to conceal and disguise the true ownership of assets. Often used for money laundering, to under-report income or to totally avoid filing a tax return.
- Zero wages
After employers file the taxpayer’s W-2 showing earnings, the individual files an amended or “corrected” W-2 reducing or zeroing the amount earned.
- Structured entity credits
This is a new scam that refers to the formation of partnerships to own and sell things like state conservation easement credits and federal rehabilitation credits. The partnership then declares a total loss, which supposedly can be deducted from returns. These investments are not valid under federal law and consequently are not deductible.
- Attempted abatement of previously assessed taxes
A taxpayer uses IRS Form 843 to request abatement of previously assessed taxes. Usually the perpetrator of the scam has not previously filed tax returns and the tax they are trying to have abated has been imposed through the IRS Substitute for Return program.
- Frivolous arguments
Frivolous arguments include that paying taxes is voluntary; that Form 1040 violates the Fifth Amendment right against self-incrimination; that Congress’s power to collect taxes was never ratified under the Sixteenth Amendment, and that wages are not income. Countless taxpayers have tried and failed making these arguments.
You should contact the IRS or your experienced and reliable tax attorneys at the Thorgood Law Firm www.thorgoodlaw.com to verify whether some action you or someone else has undertaken regarding your taxes is legal, or have been a victim of a phishing scam. For a FREE consultation call 212-490-0704.
