Top Scams of 2017
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W-2 Phishing Scam: During 2017, a dangerous email scam was circulating nationwide and targeting employers, including tax exempt entities, : universities and schools, government and private-sector businesses. The scammer poses as an internal executive requesting employee Forms W-2 and Social Security Number information from company payroll or human resources departments. They may even send an initial friendly greeting such as “Hi, are you in today” before the request. This scam is sometimes referred to as a business email compromise (BEC) or business email spoofing (BES).
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Fake Charities: Giving to a charity can be very fulfilling. However, taxpayers should be cautious about groups masquerading as charitable organizations to attract donations from unsuspecting contributors. Research the organization to know where your money is going.
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Phishing: Remember, the IRS will never initiate contact with taxpayers via email about a tax bill or refund. Don’t click on emails or fake web sites claiming to be from the IRS.
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Phone Scams: Criminals impersonating IRS agents remain an ongoing threat to taxpayers. They usually threaten with police arrest.
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Identity Theft: Tax time is the worst time for identity theft, although it can absolutely happen year-round. The IRS aggressively pursues criminals that file fraudulent returns using someone else’s Social Security number. Continue to be extremely cautious when giving out sensitive information. Better safe than sorry!
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Return Preparer Fraud: The majority of tax professionals provide honest high-quality service. However, there are some dishonest preparers who set up shop each filing season to take advantage of taxpayers through refund fraud, identity theft and other scams.
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Inflated Refund Claims: If a tax preparer promises a huge refund, question it. Avoid preparers who ask taxpayers to sign a blank return and promise a big refund before looking at any records or charge fees based on a percentage of the refund. Fake tax preparers use flyers, advertisements, phony storefronts and word of mouth via community groups where trust is high to find their victims.
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Excessive Claims for Business Credits: Avoid improperly claiming the fuel tax credit. This tax benefit is generally not available to most taxpayers. The credit is usually limited to off-highway business use including use in farming. Also avoid misuse of the research credit. Improper claims often involve failures to participate in or substantiate qualified research activities and satisfy the requirements related to qualified research expenses.
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Falsely Padding Deductions on Returns: Avoid the temptation to falsify deductions or expenses on tax returns in order to pay less than owed or receive larger refunds. Think twice before overstating deductions such as charitable contributions and business expenses or improperly claiming credits such as the Earned Income Tax Credit or Child Tax Credit.
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Falsifying Income to Claim Credits: Don’t invent income to erroneously qualify for tax credits, such as the Earned Income Tax Credit. Taxpayers should file the most accurate return possible because they are legally responsible for what is on their return. Claiming false income can lead to taxpayers facing large bills to pay back taxes, interest and penalties. In some cases, they may even face criminal prosecution.
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Abusive Tax Shelters: Don’t use abusive tax structures to avoid paying taxes. Everyone should be on the lookout for people peddling tax shelters that sound too good to be true.
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Frivolous Tax Arguments: Don’t use frivolous tax arguments to avoid paying tax. Promoters of such schemes encourage taxpayers to make unreasonable and outlandish claims, even though they have been repeatedly thrown out of court. The penalty for filing a frivolous tax return is $5,000.
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Offshore Tax Avoidance: It’s never a good idea to hide money and income offshore. Taxpayers are best served by coming in voluntarily and taking care of their tax-filing responsibilities. The IRS offers the Offshore Voluntary Disclosure Program to enable people to catch up on their filing and tax obligations.