Did you know that the IRS has videos on You Tube? Go to http://www.youtube.com/IRSVideos on the internet, where you will find video channels that provide short, informative videos on various tax-related topics in English, American Sign Language (ASL) and a variety of foreign languages. This means that either YouTube officially has everything, or the IRS is now officially everywhere.
In the “Tax Tips” playlist on that site, you will find a number of informative-sounding titles, including “Last Minute Tax Tips” and “Need More Time to File Your Return?”
But of course, the one I was drawn to is titled “Dirty Dozen.” It’s the IRS’ annual announcement of the top twelve tax scans for the year. The video doesn’t actually list them, however. For that information I went to the press release that the IRS issued on February 16.
So here they are, the top twelve tax scams for 2012, with a sampling of the IRS commentary on each:
The IRS is increasingly seeing identity thieves looking for ways to use a legitimate taxpayer’s identity and personal information to file a tax return and claim a fraudulent refund.
Phishing is a scam typically carried out with the help of unsolicited email or a fake website that poses as a legitimate site to lure in potential victims and prompt them to provide valuable personal and financial information.
Return Preparer Fraud
Questionable return preparers have been known to skim off their clients’ refunds, charge inflated fees for return preparation services and attract new clients by promising guaranteed or inflated refunds.
Hiding Income Offshore
While there are legitimate reasons for maintaining financial accounts abroad, there are reporting requirements that need to be fulfilled. U.S. taxpayers who maintain such accounts and who do not comply with reporting and disclosure requirements are breaking the law and risk significant penalties and fines, as well as the possibility of criminal prosecution.
“Free Money” from the IRS & Tax Scams Involving Social Security
There are a number of tax scams involving Social Security. For example, scammers have been known to lure the unsuspecting with promises of non-existent Social Security refunds or rebates.
False/Inflated Income and Expenses
Including income that was never earned, either as wages or as self-employment income in order to maximize refundable credits, is another popular scam.
False Form 1099 Refund Claims
In some cases, individuals have made refund claims based on the bogus theory that the federal government maintains secret accounts for U.S. citizens and that taxpayers can gain access to the accounts by issuing 1099-OID forms to the IRS.
Promoters of frivolous schemes encourage taxpayers to make unreasonable and outlandish claims to avoid paying the taxes they owe. The IRS has a list of frivolous tax arguments that taxpayers should avoid. These arguments are false and have been thrown out of court.
Falsely Claiming Zero Wages
Filing a phony information return is an illegal way to lower the amount of taxes an individual owes. Typically, a Form 4852 (Substitute Form W-2) or a “corrected” Form 1099 is used as a way to improperly reduce taxable income to zero.
Abuse of Charitable Organizations and Deductions
IRS examiners continue to uncover the intentional abuse of 501(c)(3) organizations, including arrangements that improperly shield income or assets from taxation and attempts by donors to maintain control over donated assets or the income from donated property.
Disguised Corporate Ownership
Third parties are improperly used to request employer identification numbers and form corporations that obscure the true ownership of the business. … These entities can be used to underreport income, claim fictitious deductions, avoid filing tax returns, participate in listed transactions and facilitate money laundering, and financial crimes.
Misuse of Trusts
For years, unscrupulous promoters have urged taxpayers to transfer assets into trusts. While there are legitimate uses of trusts in tax and estate planning, some highly questionable transactions promise reduction of income subject to tax, deductions for personal expenses and reduced estate or gift taxes.
It goes without saying (but of course the IRS says it anyway) that involvement in an illegal scam can lead to significant penalties and possible criminal prosecution. The IRS Criminal Investigation Division works with the Department of Justice to close down scams and prosecute scammers.
The last time I checked, Wesley Snipes was still in prison for claiming that he didn’t have to file income tax returns. Did you file your return, or a request for an extension?
QUOTE OF THE MONTH
Don’t ask me what I want it for
If you don’t want to pay some more
‘Cause I’m the taxman,ya, I’m the taxman
Lyrics, “Taxman” 1966