July 26, 2011

IRS Warns Taxpayers About Tax Scams

By Diane Giordano, Partner, Tax & Business Services

IRS Warns Taxpayers About Tax Scams

The Internal Revenue Service recently reported an increase in tax related scams and is encouraging taxpayers to guard against unscrupulous individuals trying to persuade them to file false claims for tax credits or rebates. While the scams have increased mostly in southern and mid-western states, the IRS is warning all individuals, especially senior citizens, of false advertisements and flyers offering free money from the IRS. Promoters may use church congregations to exploiting their credibility.

The IRS has noted an increase in tax-return-related scams involving taxpayers who normally do not have a filing requirement. These taxpayers are led to believe they should file a return with the IRS for tax credits, refunds or rebates for which they are not really entitled. The refund or credit claim is ultimately rejected or the refund is much less than what was paid to the promoter. By the time the IRS issues a notice on the false claim, the money is long gone.

Unscrupulous promoters deceive people into paying for advice on how to file false claims. Some promoters may charge unreasonable amounts for preparing legitimate returns that could have been prepared for free by the IRS or IRS sponsored Volunteer Income Tax Assistance partners. In other situations, identity theft is involved since social security numbers are generally provided.

Taxpayers should be alert for the following:

  • Fictitious claims for refunds or rebates based on excess or withheld Social Security benefits.
  • Claims that Treasury Form 1080 can be used to transfer funds from the Social Security Administration to the IRS enabling a payout from the IRS.
  • Unfamiliar for-profit tax services teaming up with local churches.
  • Home-made flyers and brochures implying credits or refunds are available without proof of eligibility.
  • Offers of free money with no documentation required.
  • Promises of refunds for “Low Income – No Documents Tax Returns.”
  • Claims for the expired Economic Recovery Credit Program or Recovery Rebate Credit.
  • Advice on claiming the Earned Income Tax Credit based on exaggerated reports of self-employment income.

The IRS is warning all taxpayers, and preparers to remain vigilant. If it sounds too good to be true, it probably is.

Anyone with questions about a tax credit or programs should visit www.IRS.gov, or call the IRS toll-free number at 800-829-1040 or visit a local IRS Taxpayer Assistance Center.