Every year, the IRS releases its top twelve tax scams that rocked the year. The purpose of the IRS releasing the list of top tax scams every year is to warn taxpayers about the tax scams they might encounter at any time during the year. During the tax season, all of these tax scams reach their peak. In 2013, identity theft topped the charts.
The 2013 dirty dozen tax scams are:
- Identity Theft
- Phishing
- Return Preparer Fraud
- Hiding Income Offshore
- “Free Money” from the IRS & Tax Scams Involving Social Security
- Impersonation of Charitable Organizations
- False/Inflated Income and Expenses
- False Form 1099 Refund Claims
- Frivolous Arguments
- Falsely Claiming Zero Wages
- Disguised Corporate Ownership
- Misuse of Trusts
According to the IRS “identity theft [happens] when someone uses your personal information such as your name, Social Security number (SSN) or other identifying information, without your permission, to commit fraud or other crimes. In many cases, an identity thief uses a legitimate taxpayer’s identity to fraudulently file a tax return and claim a refund.”
During 2012, the IRS prevented the issuance of $20 billion in fraudulent refunds, including those related to identity theft, compared to only $14 billion in 2011. This January, the IRS conducted an identity theft enforcement sweep where coast-to-coast efforts against identity theft suspects led to 734 enforcement actions in January, including 298 indictments, complaints, and arrests.
Phishing, which is used by scammers to steal the identities of taxpayers, is second on the IRS’ 2013 dirty dozen:
“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.”
Stealing tax information to not only steal refund money from taxpayers but revenue from the IRS is the common way of tax fraud. Some taxpayers become the victim of a tax fraud and some may indulge in tax fraud themselves.