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H and r tax Publication 547(SP) - Additional Material Prev  Up  Next   Home   More Online Publications
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IRS Releases the Dirty Dozen Tax Scams for 2012

IR-2012-23, Feb. 16, 2012

WASHINGTON –– The Internal Revenue Service today issued its annual “Dirty Dozen” ranking of tax scams, reminding taxpayers to use caution during tax season to protect themselves against a wide range of schemes ranging from identity theft to return preparer fraud.

The Dirty Dozen listing, compiled by the IRS each year, lists a variety of common scams taxpayers can encounter at any point during the year. But many of these schemes peak during filing season as people prepare their tax returns.

“Taxpayers should be careful and avoid falling into a trap with the Dirty Dozen,” said IRS Commissioner Doug Shulman. “Scam artists will tempt people in-person, on-line and by e-mail with misleading promises about lost refunds and free money. Don’t be fooled by these scams.”

Illegal scams can lead to significant penalties and interest and possible criminal prosecution. The IRS Criminal Investigation Division works closely with the Department of Justice to shutdown scams and prosecute the criminals behind them.

The following is the Dirty Dozen tax scams for 2012:

Identity Theft

Topping this year’s list Dirty Dozen list is identity theft. In response to growing identity theft concerns, the IRS has embarked on a comprehensive strategy that is focused on preventing, detecting and resolving identity theft cases as soon as possible. In addition to the law-enforcement crackdown, the IRS has stepped up its internal reviews to spot false tax returns before tax refunds are issued as well as working to help victims of the identity theft refund schemes.

Identity theft cases are among the most complex ones the IRS handles, but the agency is committed to working with taxpayers who have become victims of identity theft.

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.
 
An IRS notice informing a taxpayer that more than one return was filed in the taxpayer’s name or that the taxpayer received wages from an unknown employer may be the first tip off the individual receives that he or she has been victimized. 

The IRS has a robust screening process with measures in place to stop fraudulent returns. While the IRS is continuing to address tax-related identity theft aggressively, the agency is also seeing an increase in identity crimes, including more complex schemes. In 2011, the IRS protected more than $1.4 billion of taxpayer funds from getting into the wrong hands due to identity theft.

In January, the IRS announced the results of a massive, national sweep cracking down on suspected identity theft perpetrators as part of a stepped-up effort against refund fraud and identity theft.  Working with the Justice Department’s Tax Division and local U.S. Attorneys’ offices, the nationwide effort targeted 105 people in 23 states.

Anyone who believes his or her personal information has been stolen and used for tax purposes should immediately contact the IRS Identity Protection Specialized Unit.  For more information, visit the special identity theft page at www.IRS.gov/identitytheft

Phishing

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. Armed with this information, a criminal can commit identity theft or financial theft.

If you receive an unsolicited email that appears to be from either the IRS or an organization closely linked to the IRS, such as the Electronic Federal Tax Payment System (EFTPS), report it by sending it to phishing@irs.gov.

It is important to keep in mind 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.  The IRS has information that can help you protect yourself from email scams.

Return Preparer Fraud

About 60 percent of taxpayers will use tax professionals this year to prepare and file their tax returns. Most return preparers provide honest service to their clients. But as in any other business, there are also some who prey on unsuspecting taxpayers.

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. Taxpayers should choose carefully when hiring a tax preparer. Federal courts have issued hundreds of injunctions ordering individuals to cease preparing returns, and the Department of Justice has pending complaints against many others.

In 2012, every paid preparer needs to have a Preparer Tax Identification Number (PTIN) and enter it on the returns he or she prepares.

Signals to watch for when you are dealing with an unscrupulous return preparer would include that they:

  • Do not sign the return or place a Preparer Tax identification Number on it.
  • Do not give you a copy of your tax return.
  • Promise larger than normal tax refunds.
  • Charge a percentage of the refund amount as preparation fee.
  • Require you to split the refund to pay the preparation fee.
  • Add forms to the return you have never filed before.
  • Encourage you to place false information on your return, such as false income, expenses and/or credits.

For advice on how to find a competent tax professional, see  Tips for Choosing a Tax Preparer.

Hiding Income Offshore

Over the years, numerous individuals have been identified as evading U.S. taxes by hiding income in offshore banks, brokerage accounts or nominee entities, using debit cards, credit cards or wire transfers to access the funds. Others have employed foreign trusts, employee-leasing schemes, private annuities or insurance plans for the same purpose.

The IRS uses information gained from its investigations to pursue taxpayers with undeclared accounts, as well as the banks and bankers suspected of helping clients hide their assets overseas. The IRS works closely with the Department of Justice to prosecute tax evasion cases.

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.
 
Since 2009, 30,000 individuals have come forward voluntarily to disclose their foreign financial accounts, taking advantage of special opportunities to bring their money back into the U.S. tax system and resolve their tax obligations. And, with new foreign account reporting requirements being phased in over the next few years, hiding income offshore will become increasingly more difficult.

At the beginning of this year, the IRS reopened the Offshore Voluntary Disclosure Program (OVDP) following continued strong interest from taxpayers and tax practitioners after the closure of the 2011 and 2009 programs. The IRS continues working on a wide range of international tax issues and follows ongoing efforts with the Justice Department to pursue criminal prosecution of international tax evasion.  This program will be open for an indefinite period until otherwise announced.

The IRS has collected $3.4 billion so far from people who participated in the 2009 offshore program, reflecting closures of about 95 percent of the cases from the 2009 program. On top of that, the IRS has collected an additional $1 billion from up front payments required under the 2011 program.  That number will grow as the IRS processes the 2011 cases.

“Free Money” from the IRS & Tax Scams Involving Social Security

Flyers and advertisements for free money from the IRS, suggesting that the taxpayer can file a tax return with little or no documentation, have been appearing in community churches around the country. These schemes are also often spread by word of mouth as unsuspecting and well-intentioned people tell their friends and relatives.

Scammers prey on low income individuals and the elderly. They build false hopes and charge people good money for bad advice. In the end, the victims discover their claims are rejected. Meanwhile, the promoters are long gone. The IRS warns all taxpayers to remain vigilant.

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. In another situation, a taxpayer may really be due a credit or refund but uses inflated information to complete the return. 

Beware. Intentional mistakes of this kind can result in a $5,000 penalty.

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. Claiming income you did not earn or expenses you did not pay in order to secure larger refundable credits such as the Earned Income Tax Credit could have serious repercussions.  This could result in repaying the erroneous refunds, including interest and penalties, and in some cases, even prosecution. 

Additionally, some taxpayers are filing excessive claims for the fuel tax credit. Farmers and other taxpayers who use fuel for off-highway business purposes may be eligible for the fuel tax credit. But other individuals have claimed the tax credit when their occupations or income levels make the claims unreasonable. Fraud involving the fuel tax credit is considered a frivolous tax claim and can result in a penalty of $5,000.

False Form 1099 Refund Claims

In this ongoing scam, the perpetrator files a fake information return, such as a Form 1099 Original Issue Discount (OID), to justify a false refund claim on a corresponding tax return. 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.

Don’t fall prey to people who encourage you to claim deductions or credits to which you are not entitled or willingly allow others to use your information to file false returns. If you are a party to such schemes, you could be liable for financial penalties or even face criminal prosecution.

Frivolous Arguments

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. While taxpayers have the right to contest their tax liabilities in court, no one has the right to disobey the law.

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. The taxpayer may also submit a statement rebutting wages and taxes reported by a payer to the IRS.

Sometimes, fraudsters even include an explanation on their Form 4852 that cites statutory language on the definition of wages or may include some reference to a paying company that refuses to issue a corrected Form W-2 for fear of IRS retaliation. Taxpayers should resist any temptation to participate in any variations of this scheme. Filing this type of return may result in a $5,000 penalty.

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. The IRS is investigating schemes that involve the donation of non-cash assets –– including situations in which several organizations claim the full value of the same non-cash contribution. Often these donations are highly overvalued or the organization receiving the donation promises that the donor can repurchase the items later at a price set by the donor. The Pension Protection Act of 2006 imposed increased penalties for inaccurate appraisals and set new standards for qualified appraisals.

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. The IRS is working with state authorities to identify these entities and bring the owners into compliance with the law.

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. Such trusts rarely deliver the tax benefits promised and are used primarily as a means of avoiding income tax liability and hiding assets from creditors, including the IRS.

IRS personnel have seen an increase in the improper use of private annuity trusts and foreign trusts to shift income and deduct personal expenses. As with other arrangements, taxpayers should seek the advice of a trusted professional before entering a trust arrangement.
 

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Page Last Reviewed or Updated: 11-Feb-2014

The H And R Tax

H and r tax 5. H and r tax   How To Get Tax Help Table of Contents Whether it's help with a tax issue, preparing your tax return or a need for a free publication or form, get the help you need the way you want it: online, use a smart phone, call or walk in to an IRS office or volunteer site near you. H and r tax Free help with your tax return. H and r tax   You can get free help preparing your return nationwide from IRS-certified volunteers. H and r tax The Volunteer Income Tax Assistance (VITA) program helps low-to-moderate income, elderly, people with disabilities, and limited English proficient taxpayers. H and r tax The Tax Counseling for the Elderly (TCE) program helps taxpayers age 60 and older with their tax returns. H and r tax Most VITA and TCE sites offer free electronic filing and all volunteers will let you know about credits and deductions you may be entitled to claim. H and r tax In addition, some VITA and TCE sites provide taxpayers the opportunity to prepare their own return with help from an IRS-certified volunteer. H and r tax To find the nearest VITA or TCE site, you can use the VITA Locator Tool on IRS. H and r tax gov, download the IRS2Go app, or call 1-800-906-9887. H and r tax   As part of the TCE program, AARP offers the Tax-Aide counseling program. H and r tax To find the nearest AARP Tax-Aide site, visit AARP's website at www. H and r tax aarp. H and r tax org/money/taxaide or call 1-888-227-7669. H and r tax For more information on these programs, go to IRS. H and r tax gov and enter “VITA” in the search box. H and r tax Internet. H and r tax    IRS. H and r tax gov and IRS2Go are ready when you are —24 hours a day, 7 days a week. H and r tax Download the free IRS2Go app from the iTunes app store or from Google Play. H and r tax Use it to check your refund status, order transcripts of your tax returns or tax account, watch the IRS YouTube channel, get IRS news as soon as it's released to the public, subscribe to filing season updates or daily tax tips, and follow the IRS Twitter news feed, @IRSnews, to get the latest federal tax news, including information about tax law changes and important IRS programs. H and r tax Check the status of your 2013 refund with the Where's My Refund? application on IRS. H and r tax gov or download the IRS2Go app and select the Refund Status option. H and r tax The IRS issues more than 9 out of 10 refunds in less than 21 days. H and r tax Using these applications, you can start checking on the status of your return within 24 hours after we receive your e-filed return or 4 weeks after you mail a paper return. H and r tax You will also be given a personalized refund date as soon as the IRS processes your tax return and approves your refund. H and r tax The IRS updates Where's My Refund? every 24 hours, usually overnight, so you only need to check once a day. H and r tax Use the Interactive Tax Assistant (ITA) to research your tax questions. H and r tax No need to wait on the phone or stand in line. H and r tax The ITA is available 24 hours a day, 7 days a week, and provides you with a variety of tax information related to general filing topics, deductions, credits, and income. H and r tax When you reach the response screen, you can print the entire interview and the final response for your records. H and r tax New subject areas are added on a regular basis. H and r tax  Answers not provided through ITA may be found in Tax Trails, one of the Tax Topics on IRS. H and r tax gov which contain general individual and business tax information or by searching the IRS Tax Map, which includes an international subject index. H and r tax You can use the IRS Tax Map, to search publications and instructions by topic or keyword. H and r tax The IRS Tax Map integrates forms and publications into one research tool and provides single-point access to tax law information by subject. H and r tax When the user searches the IRS Tax Map, they will be provided with links to related content in existing IRS publications, forms and instructions, questions and answers, and Tax Topics. H and r tax Coming this filing season, you can immediately view and print for free all 5 types of individual federal tax transcripts (tax returns, tax account, record of account, wage and income statement, and certification of non-filing) using Get Transcript. H and r tax You can also ask the IRS to mail a return or an account transcript to you. H and r tax Only the mail option is available by choosing the Tax Records option on the IRS2Go app by selecting Mail Transcript on IRS. H and r tax gov or by calling 1-800-908-9946. H and r tax Tax return and tax account transcripts are generally available for the current year and the past three years. H and r tax Determine if you are eligible for the EITC and estimate the amount of the credit with the Earned Income Tax Credit (EITC) Assistant. H and r tax Visit Understanding Your IRS Notice or Letter to get answers to questions about a notice or letter you received from the IRS. H and r tax If you received the First Time Homebuyer Credit, you can use the First Time Homebuyer Credit Account Look-up tool for information on your repayments and account balance. H and r tax Check the status of your amended return using Where's My Amended Return? Go to IRS. H and r tax gov and enter Where's My Amended Return? in the search box. H and r tax You can generally expect your amended return to be processed up to 12 weeks from the date we receive it. H and r tax It can take up to 3 weeks from the date you mailed it to show up in our system. H and r tax Make a payment using one of several safe and convenient electronic payment options available on IRS. H and r tax gov. H and r tax Select the Payment tab on the front page of IRS. H and r tax gov for more information. H and r tax Determine if you are eligible and apply for an online payment agreement, if you owe more tax than you can pay today. H and r tax Figure your income tax withholding with the IRS Withholding Calculator on IRS. H and r tax gov. H and r tax Use it if you've had too much or too little withheld, your personal situation has changed, you're starting a new job or you just want to see if you're having the right amount withheld. H and r tax Determine if you might be subject to the Alternative Minimum Tax by using the Alternative Minimum Tax Assistant on IRS. H and r tax gov. H and r tax Request an Electronic Filing PIN by going to IRS. H and r tax gov and entering Electronic Filing PIN in the search box. H and r tax Download forms, instructions and publications, including accessible versions for people with disabilities. H and r tax Locate the nearest Taxpayer Assistance Center (TAC) using the Office Locator tool on IRS. H and r tax gov, or choose the Contact Us option on the IRS2Go app and search Local Offices. H and r tax An employee can answer questions about your tax account or help you set up a payment plan. H and r tax Before you visit, check the Office Locator on IRS. H and r tax gov, or Local Offices under Contact Us on IRS2Go to confirm the address, phone number, days and hours of operation, and the services provided. H and r tax If you have a special need, such as a disability, you can request an appointment. H and r tax Call the local number listed in the Office Locator, or look in the phone book under United States Government, Internal Revenue Service. H and r tax Apply for an Employer Identification Number (EIN). H and r tax Go to IRS. H and r tax gov and enter Apply for an EIN in the search box. H and r tax Read the Internal Revenue Code, regulations, or other official guidance. H and r tax Read Internal Revenue Bulletins. H and r tax Sign up to receive local and national tax news and more by email. H and r tax Just click on “subscriptions” above the search box on IRS. H and r tax gov and choose from a variety of options. H and r tax Phone. H and r tax   You can call the IRS, or you can carry it in your pocket with the IRS2Go app on your smart phone or tablet. H and r tax Download the free IRS2Go app from the iTunes app store or from Google Play. H and r tax Call to locate the nearest volunteer help site, 1-800-906-9887 or you can use the VITA Locator Tool on IRS. H and r tax gov, or download the IRS2Go app. H and r tax Low-to-moderate income, elderly, people with disabilities, and limited English proficient taxpayers can get free help with their tax return from the nationwide Volunteer Income Tax Assistance (VITA) program. H and r tax The Tax Counseling for the Elderly (TCE) program helps taxpayers age 60 and older with their tax returns. H and r tax Most VITA and TCE sites offer free electronic filing. H and r tax Some VITA and TCE sites provide IRS-certified volunteers who can help prepare your tax return. H and r tax Through the TCE program, AARP offers the Tax-Aide counseling program; call 1-888-227-7669 to find the nearest Tax-Aide location. H and r tax Call the automated Where's My Refund? information hotline to check the status of your 2013 refund 24 hours a day, 7 days a week at 1-800-829-1954. H and r tax If you e-file, you can start checking on the status of your return within 24 hours after the IRS receives your tax return or 4 weeks after you've mailed a paper return. H and r tax The IRS issues more than 9 out of 10 refunds in less than 21 days. H and r tax Where's My Refund? will give you a personalized refund date as soon as the IRS processes your tax return and approves your refund. H and r tax Before you call this automated hotline, have your 2013 tax return handy so you can enter your social security number, your filing status, and the exact whole dollar amount of your refund. H and r tax The IRS updates Where's My Refund? every 24 hours, usually overnight, so you only need to check once a day. H and r tax Note, the above information is for our automated hotline. H and r tax Our live phone and walk-in assistors can research the status of your refund only if it's been 21 days or more since you filed electronically or more than 6 weeks since you mailed your paper return. H and r tax Call the Amended Return Hotline, 1-866-464-2050, to check the status of your amended return. H and r tax You can generally expect your amended return to be processed up to 12 weeks from the date we receive it. H and r tax It can take up to 3 weeks from the date you mailed it to show up in our system. H and r tax Call 1-800-TAX-FORM (1-800-829-3676) to order current-year forms, instructions, publications, and prior-year forms and instructions (limited to 5 years). H and r tax You should receive your order within 10 business days. H and r tax Call TeleTax, 1-800-829-4477, to listen to pre-recorded messages covering general and business tax information. H and r tax If, between January and April 15, you still have questions about the Form 1040, 1040A, or 1040EZ (like filing requirements, dependents, credits, Schedule D, pensions and IRAs or self-employment taxes), call 1-800-829-1040. H and r tax Call using TTY/TDD equipment, 1-800-829-4059 to ask tax questions or order forms and publications. H and r tax The TTY/TDD telephone number is for people who are deaf, hard of hearing, or have a speech disability. H and r tax These individuals can also contact the IRS through relay services such as the Federal Relay Service. H and r tax Walk-in. H and r tax   You can find a selection of forms, publications and services — in-person. H and r tax Products. H and r tax You can walk in to some post offices, libraries, and IRS offices to pick up certain forms, instructions, and publications. H and r tax Some IRS offices, libraries, and city and county government offices have a collection of products available to photocopy from reproducible proofs. H and r tax Services. H and r tax You can walk in to your local TAC for face-to-face tax help. H and r tax An employee can answer questions about your tax account or help you set up a payment plan. H and r tax Before visiting, use the Office Locator tool on IRS. H and r tax gov, or choose the Contact Us option on the IRS2Go app and search Local Offices for days and hours of operation, and services provided. H and r tax Mail. H and r tax   You can send your order for forms, instructions, and publications to the address below. H and r tax You should receive a response within 10 business days after your request is received. H and r tax Internal Revenue Service 1201 N. H and r tax Mitsubishi Motorway Bloomington, IL 61705-6613   The Taxpayer Advocate Service Is Here to Help You. H and r tax The Taxpayer Advocate Service (TAS) is your voice at the IRS. H and r tax Our job is to ensure that every taxpayer is treated fairly and that you know and understand your rights. H and r tax   What can TAS do for you? We can offer you free help with IRS problems that you can't resolve on your own. H and r tax We know this process can be confusing, but the worst thing you can do is nothing at all! TAS can help if you can't resolve your tax problem and: Your problem is causing financial difficulties for you, your family, or your business. H and r tax You face (or your business is facing) an immediate threat of adverse action. H and r tax You've tried repeatedly to contact the IRS but no one has responded, or the IRS hasn't responded by the date promised. H and r tax   If you qualify for our help, you'll be assigned to one advocate who'll be with you at every turn and will do everything possible to resolve your problem. H and r tax Here's why we can help: TAS is an independent organization within the IRS. H and r tax Our advocates know how to work with the IRS. H and r tax Our services are free and tailored to meet your needs. H and r tax We have offices in every state, the District of Columbia, and Puerto Rico. H and r tax   How can you reach us? If you think TAS can help you, call your local advocate, whose number is in your local directory and at Taxpayer Advocate, or call us toll-free at 1-877-777-4778. H and r tax   How else does TAS help taxpayers?  TAS also works to resolve large-scale, systemic problems that affect many taxpayers. H and r tax If you know of one of these broad issues, please report it to us through our Systemic Advocacy Management System. H and r tax Prev  Up  Next   Home   More Online Publications