- There are three tax systems in the U.S.: one for the informed, one for the uninformed and one for the ill-informed.
- Before you file, make sure you review the IRS’s “Dirty Dozen” list of tax scams for 2016.
- An experienced and vetted tax preparer will not only prepare your return the right way, but also can help you avoid being duped by tax scammers.
During the 1920s and 1930s, a renowned circuit court judge, the Honorable Learned Hand, used to say that there were two tax systems in the United States: one for the informed and one for the uninformed. I would add a third system to that list—one for the ill-informed.
Since many of you are currently filing your 2015 tax returns, I wanted to make sure you saw the Internal Revenue Service’s Dirty Dozen tax scams for 2016. Most scams fall under the categories of tax scams, tax artists, fraudulent tax preparers and do-it-yourself abusers.
Let’s look closer at the Dirty Dozen list. First, there are the outright scams.
- Identity theft. The IRS continues to aggressively pursue the criminals who file fraudulent returns using someone else’s Social Security number.
- Phone scams. The IRS is never going to call you on the phone and say, “We’re going to put you in jail if you don’t pay this tax bill” or “We’re going to deport you,” among other things. If you get these kinds of phone calls, ignore them. The real IRS never communicates this way with taxpayers.
- Email, phishing. Fraudsters are trying to get you to release your personal information and threatening to do all kinds of horrible things to you if you refuse. The real IRS doesn’t contact you by email about a bill or a refund. Again, that’s a scam.
- Fake charities. Scammers try to get your money by claiming to be from a legitimate charity. There are online resources to check them out, and we can certainly investigate them for you if you wish.
- Offshore tax-avoidance schemes. These have become increasingly common and most of them are schemes that don’t work out, so don’t fall prey to them.
The second category concerns what I call unscrupulous tax preparers. There are three basic types:
- Return preparer fraud. This is where scammers try to steal your refund or identity. Again, they’re trying to get your personal tax identification information by claiming they can help you save more money on your taxes.
- Inflated refund claims. This is similar to return preparer fraud. Fraudsters claim they can get you a bigger tax refund as long as you’re willing to sign a blank tax return for them. Don’t fall for that.
- Frivolous tax arguments. Fraudsters claim they have a wide variety of ways to help you get more refund money back, but when you look into their claims, you’ll see they’re completely outlandish and don’t make a lot of sense.
The third broad category relates to taxpayer abuses:
- Padding your deductions can get you into trouble.
- Excessive claims for business credits. We see business owners try to stretch the rules too far for legitimate business credits and get themselves into trouble.
- Falsifying income in order to claim credits.
- Abusive tax shelters.
These all fall under taxpayer abuses in which people overstep the boundaries of legitimate deductions.
Remember, if you don’t report your income or don’t report it properly, the IRS can send you to jail. The IRS has no sense of humor and no tolerance for things that don’t fall under the tax code.
If nothing else, hiring a good tax preparer is worth it. When you start getting suspicious phone calls, emails and other “offers” like we’ve talked about above, make sure you run them by your tax preparer right away. He or she can help you avoid being scammed and save you countless hours of headaches and penalties that come with having the IRS on your case.
So until next time, enjoy. Gary
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