Don't Be Fooled:
The Dirty Dozen Tax Scams for 2013
the 2012 tax season is officially over, tax scams
unfortunately are not, which is why the IRS issues an
annual "Dirty Dozen" list that includes common tax scams
Taxpayers should be aware of these tax scams so they can
protect themselves against claims that sound too good to
be true, and because taxpayers who buy into illegal tax scams
can end up facing significant penalties and interest and even
Here are the tax scams that made the IRS "Dirty Dozen" list
this filing season:
1. Identity Theft. Tax
fraud through the use of identity theft tops this year's
"Dirty Dozen" list. Combating identity theft and refund fraud
is a top priority for the IRS. The IRS's ID theft strategy
focuses on prevention, detection and victim assistance. During
2012, the IRS protected $20 billion of fraudulent refunds,
including those related to identity theft. This compares to
$14 billion in 2011.
Taxpayers who believe they are
at risk of identity theft due to lost or stolen personal
information should immediately contact the IRS so the agency
can take action to secure their tax account. If you have
received a notice from the IRS, call the phone number on the
2. Phishing. Phishing
typically involves an unsolicited email or a fake website that
seems legitimate but lures victims into providing personal and
financial information. Once scammers obtain that information,
they can commit identity theft or financial theft.
The IRS does not initiate
contact with taxpayers by email to request personal or
financial information. This includes any type of electronic
communication, such as text messages and social media
channels. If you receive an unsolicited email that appears to
be from the IRS, send it to email@example.com.
3. Return Preparer Fraud.
Although most return preparers are reputable and provide good
service, you should choose carefully when hiring someone to
prepare your tax return. Only use a preparer who signs the
return they prepare for you and enters their IRS Preparer Tax
Identification Number (PTIN).
4. Hiding Income Offshore.
One form of tax evasion is hiding income in offshore accounts.
This includes using debit cards, credit cards or wire
transfers to access those funds. While there are legitimate
reasons for maintaining financial accounts abroad, there are
reporting requirements taxpayers need to fulfill. Failing to
comply can lead to penalties or criminal prosecution.
5. "Free Money" from the
IRS & Tax Scams Involving Social Security. Beware of scammers
who prey on people with low income, the elderly and church
members around the country. Scammers use flyers and ads with
bogus promises of refunds that don't exist. The schemes target
people who have little or no income and normally don't have to
file a tax return. In some cases, a victim may be due a
legitimate tax credit or refund but scammers fraudulently
inflate income or use other false information to file a return
to obtain a larger refund. By the time people find out the IRS
has rejected their claim, the promoters are long gone.
6. Impersonation of Charitable
Organizations. Following major disasters, it's
common for scam artists to impersonate charities to get money
or personal information from well-intentioned people. They may
even directly contact disaster victims and claim to be working
for or on behalf of the IRS to help the victims file casualty
loss claims and get tax refunds. Taxpayers need to be sure
they donate to recognized charities.
7. False/Inflated Income and Expenses.
Falsely claiming income you did not earn or expenses you did
not pay in order to get larger refundable tax credits is tax
fraud. This includes false claims for the Earned Income Tax
Credit. In many cases the taxpayer ends up repaying the
refund, including penalties and interest. In some cases the
taxpayer faces criminal prosecution. In one particular scam,
taxpayers file excessive claims for the fuel tax credit. Fraud
involving the fuel tax credit is a frivolous claim and can
result in a penalty of $5,000.
8. False Form 1099 Refund Claims.
In this scam, the perpetrator files a fake information return,
such as a Form 1099-OID, to justify a false refund claim.
9. Frivolous Arguments.
Promoters of frivolous schemes advise taxpayers to make
unreasonable and outlandish claims to avoid paying the taxes
they owe. These are false arguments that the courts have
consistently thrown out. While taxpayers have the right to
contest their tax liabilities in court, no one has the right
to disobey the law.
10. Falsely Claiming Zero Wages.
Filing a phony information return is an illegal way to lower
the amount of taxes an individual owes. Typically, scammers
use a Form 4852 (Substitute Form W-2) or a "corrected" Form
1099 to improperly reduce taxable income to zero. Filing this
type of return can result in a $5,000 penalty.
11. Disguised Corporate Ownership.
Scammers improperly use third parties form corporations that
hide the true ownership of the business. They help dishonest
individuals underreport income, claim fake deductions and
avoid filing tax returns. They also facilitate money
laundering and other financial crimes.
12. Misuse of Trusts.
There are legitimate uses of trusts in tax and estate
planning. But some questionable transactions promise to reduce
the amount of income that is subject to tax, offer deductions
for personal expenses and reduced estate or gift taxes. Such
trusts rarely deliver the promised tax benefits. They
primarily help avoid taxes and hide assets from creditors,
including the IRS.
If you think you've been scammed, call our office immediately
301-657-8080 as we can work with you to determine what
steps to take to minimize or fix any damage that has been
Financial Services at Sullivan & Company, CPAs
Grow leads our Financial Services Division and is here to
help you navigate your financial future. As an Investment
Advisor Representative, she is able to provide an
independent opinion on the investments you already own or
are considering buying.
We can structure a portfolio
based on your risk tolerance or we can help you decide how
to invest in your company 401(k) plan. We work with each
client to identify their concerns and to provide solutions
according to their situation.
is also experienced in company retirement plans. If you own
a business that does not have a plan; we can discuss your
options and set up a plan that fits your company.
If your business already has a
plan; we offer a free evaluation of the plan to ensure that
it is up to date and working well for you and your
Our goal is to provide personal, unbiased and independent
advice to help you make well-informed decisions about your
financial life and investments.
Contact Kathy Grow or Jordana Para to set up a free initial
consultation (301) 657-8080.
And as always if you have any questions about accounting or
investments and how they effect you or your business, please give
us a call at
(240) 316-3564. We
can help guide you in the right direction.
Remember you can call our offices if you have any
questions about these or any other accounting, tax,
financial planning or insurance related issues, at 301-657-8080.
Regards, Paul Sullivan, CPA
President, Sullivan & Company