Tax Fraud Up and Rising

Posted on July 2, 2021

Tax Fraud Up and Rising

Tax fraud affects both taxpayers and the IRS adversely. Every year millions of dollars are lost due to tax fraud schemes, some of which run nationwide. A sharp increase in tax cheating this year has the IRS busy. With over one million tax returns termed ‘potentially fraudulent’ and almost a million said to be a part of a single fraudulent tax scheme named Operation Mass Mail, the IRS is struggling to curb tax scams.

Tax Fraud Schemes

It is only after a tax scam is busted that American taxpayers and enforcement agencies get to know the magnitude of the problem. A California man ran a nationwide tax scam and attempted to receive nearly $100 million in fraudulent tax refunds. This was the largest fake claims scheme that was unearthed and prosecuted in Missouri.

Poynter, the main accused, with another 15 co-conspirators allegedly prepared and filed fraudulent tax returns to obtain huge refunds. Poynter and five other accused lived in the Kansas City area. They filed more than 250 false tax returns under this scheme.

Poynter pleaded guilty to tax fraud and is awaiting trial. Another accused, Perdido, pleaded guilty and agreed to surrender $805,749 he received from the IRS in refund after false filing of tax returns.

Tax Fraud of Tax Relief Companies

Tax and fraud stick together even in the most unlikely of places. Tax resolution companies are expected to protect taxpayers from scammers and bad financial advisors, but some big names in the tax industry proved otherwise. Tax Masters, American Tax Relief, Roni Deutch ‘The Tax Lady’, J.K. Harris, Tax Relief ASAP are fraudulent tax companies that were running tax scams under the banner of tax resolution services.

These companies twisted IRS policies to tempt taxpayers into hiring their services. Tax Masters committed more than 110,000 violations of Texas’ Deceptive Trade Practices Act and has been ordered to pay more than $195 million in penalties for cheating its clients.

American Tax Relief ran a tax scam of more than $60 million. They were shut down by the FTC (Federal Trade Commission). Roni Deutch and J.K. Harris twisted the facts of pennies on the dollar, a popular term for IRSs Offer in Compromise, to attract taxpayers into hiring their services. Extracting large up-front fee and hidden costs in the promise of reducing tax debt was their method of cheating their clients. After numerous consumer complaints, these tax companies were forced to shut down.

Some of the factors contributing to the rise of tax fraud are online filing, huge refundable credits and taxpayers using their debit cards to receive refunds. This gives opportunity for identity theft, which is rampant online.

Taxpayers are advised to use only those sources to filing tax returns that are authentic. They can stay protected from tax fraud by using the IRS website for online filing. Keeping your information safe is the best way to avoid falling into tax fraud schemes.