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Every year, the Internal Revenue Service picks a list of the 12 worst scams that it’s seeing. While many of them peak during tax season, others can come calling at any point in the year.
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1. Phone scams

Aggressive and threatening phone calls from criminals impersonating IRS agents make a repeat appearance on the list this year, with scammers threatening potential victims with arrest, deportation and just about everything else to personal financial information. Since October 2013, the IRS has received reports of over 290,000 bogus phone contacts, as knows of at least 3,000 victims who’ve lost a combined $14 million.

The IRS says this all the time, but they can’t say it enough: They never call taxpayers out of the blue. If you get a call from someone claiming to be an IRS agent on a matter you’re not already aware of, they’re scamming you.

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2. Phishing

Fake e-mails or Web sites looking to steal personal information are a perennial on the Dirty Dozen list, since this information is often used to file bogus tax returns.

Again, the IRS won’t send an e-mail about a bill or refund out of the blue, and almost never requests personal financial information other than through the mail. They ask people who receive suspicious communications to forward them to phishing@irs.gov.

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Identification documents (social security, driver license and credit cards) in hand of thief, isolated on white.

3. ID Theft

An enormous problem for the IRS – and taxpayers! – tax-related identity theft is another repeat offender on the Dirty Dozen.

While the IRS has made significant strides in fighting ID theft -- including creating a special Identity Protection PIN for victims -- taxpayers need to do most of the heavy lifting themselves, by being vigilant against phishing attacks, monitoring their financial accounts, and otherwise protecting their information. One tip they may not be aware of: Filing their taxes early in tax season may prevent an ID thief from filing in your name or under your Social Security number.

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4. Return Preparer Fraud

While the IRS is quick to note that the vast majority of tax preparers are honest, a very small minority of unscrupulous preparers are making the list this year, setting up shop to steal taxpayers’ information for refund fraud, ID theft and other scams.

One common tipoff: promises of outlandishly large refunds.

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5. Hiding Money or Income Offshore

While the IRS offers occasional voluntary disclosure programs for money held inappropriately overseas, it’s also happy to conduct audits and pursue criminal charges on those cases, so it’s warning taxpayers not to be lured into thinking they can hide money outside the country. And even if the money is legitimately held overseas, there are reporting requirements that must be met.
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6. Inflated Refund Claims

Taxpayers may be fooled – often by unscrupulous tax preparers (See No. 4) -- into making claims on their tax return that aren’t supportable. In some cases, the preparer may even have the taxpayer sign a blank return, then prepare two returns – one with a smaller refund claim, which they show the taxpayer, and one with a larger claim, which they submit to the IRS so they can keep the difference between the two refunds.

It’s important for taxpayers to remember that no matter who prepares their return, they are responsible for it.

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7. Fake Charities

One of the more disgusting entries in the Dirty Dozen is the range of groups and individuals that masquerade as charities to attract donations that go straight into their pockets.

These often pop up in the wake of disasters and tragedies, and the IRS recommends checking out a charity of interest with its EO Select Check feature, which can help them find legitimate charities.

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8. Filing Fake Documents to Hide Income

Filing phony information returns, like 1099s or W-2s, or other fake documents in an attempt to lower taxable income is a repeat offender among the Dirty Dozen, with scammers often offering to falsify information. Some will even attempt to claim zero wages, possibly as part of a frivolous argument against the entire tax system (see No. 12). None of this will fly with the IRS, however, which has been weeding out these types of scams for years.
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9. Abusive Tax Shelters

Another time-dishonored member of the Dirty Dozen, abusive tax shelters and complex tax avoidance schemes may take new forms all the time, but they remain illegal. A common version now involves hiding income in foreign jurisdictions and then accessing it through credit or debit cards here.
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10. Falsifying Income to Claim Tax Credits

Dishonestly inflating one’s income to maximize refundable credits is never a good idea, however tempting. As the number and complexity of credits increases, this has become an ever-more attractive area for scammers, unscrupulous preparers and others to recommend misreporting income to qualify for everything from the Earned Income Tax Credit to the most esoteric of government incentives.

Once again, it’s important to note that the taxpayer is responsible for what’s on their tax return – and that the IRS is getting better and better at sniffing this sort of thing out.

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11. Excessive Claims for Fuel Tax Credits

The fuel tax credit is generally limited to off-highway business use or in farming, and so is not available to most taxpayers – but that hasn’t stopped scammers using and promoting it as a way to lower your tax bill.

Fraud involving the fuel tax credit is considered a frivolous tax claim and can result in a penalty of $5,000, so no matter what a scammer might suggest, it’s not worth risking on a tax return.

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12. Frivolous Tax Arguments

Our favorite of the Dirty Dozen, the frivolous arguments that some use to try to avoid paying their taxes never fail to amuse. They range from absurd claims about early Colonial American history to bizarre theories about the meaning of “income,” but they all have this in common: They’re nonsense.

Scammers will often sell books, videos or other material about their frivolous arguments, marketing them as sure-fire ways to lower your tax bill, but the IRS has collected a long list of them that have been completely debunked in court (See the IRS’s The Truth About Frivolous Tax Arguments.”)

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