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IRS Warns About 'Dirty Dozen' Tax Scams

2:23 PM, Mar 26, 2013   |    comments
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Kevin McCoy, USA TODAY

Identity theft, phishing scams, return-preparer fraud and offshore tax evasion head the annual IRS list of "dirty dozen" tax scams issued Tuesday.

Tax fraud by use of identity theft to claim federal tax refunds topped the 2013 list of scams. Hundreds of thousands of unsuspecting Americans continue to be victimized by thieves who've gained access to the taxpayers' names, Social Security numbers or other identifying information.

The IRS said it prevented the issuance of $20 billion in fraudulent refunds last year, including those related to identity theft. That was up from $14 billion in 2011.

Despite IRS crackdowns, the problem continues to grow. The agency's identity-theft caseload soared to 449,809 in 2012, up more than 80% from 2011, National Taxpayer Advocate Nina Olson reported to Congress in January.

About 3,000 IRS employees are assigned to work on identity-theft cases, more than double the number in late 2011. And the tax agency has a special section on its website, irs.gov, to help taxpayers and victims.

Other scams on this year's "dirty dozen" list:

• Phishing, which typically involves an unsolicited email or fake website designed to lure potential victims into providing personal or financial information that thieves use in identity-theft crimes.

• Return-preparer fraud by unscrupulous tax professionals who file for unwarranted refunds or deductions or who use client information for identity theft scams. Although most return preparers are honest, the IRS urged taxpayers to choose their tax professional carefully.

• Off-shore tax evasion involves Americans who fail to declare and pay taxes on income gained on assets hidden in foreign bank accounts. The IRS has collected $5.5 billion since 2009 from American owners of foreign accounts who have participated in voluntary disclosure programs.

• Ads or flyers that purportedly offer "free money" from the IRS or Social Security Administration. The IRS said to beware of potential scammers who use these false promises to victimize the elderly and others.

Rounding out the "dirty dozen" scams were: tax fraud through impersonation of charitable organizations for donations; filing tax returns with false or inflated income and expenses; falsely claiming tax deductions or credits to which you're not entitled; making frivolous arguments to avoid federal taxes; falsely claiming zero wages; using disguised corporate ownership entities to under-report income or avoid filing tax returns; and misusing trusts in an improper effort to cut or eliminate tax liability.

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