Frauds use various methods to steal tax money of taxpayers. To stay safe from tax
scams, taxpayers need to keep themselves updated on the ways scammers use to dupe
innocent taxpayers. Top tax scams that most taxpayers encounter and many fall into,
especially during the tax season, are explained below.
Tax Scams: Pennies on the Dollar
Many fraudulent tax companies misinterpret IRS tax resolution programs to tempt
taxpayers to hire their services. Offer in Compromise, an IRS tax resolution program
that reduces the tax debt amount of those who qualify for it, has been used by
fraudulent tax companies to run tax scams.
Fraudulent tax companies advertise they can reduce the tax amount of taxpayers
considerably, even to zero. They even claim to have reduced the back taxes of
many taxpayers. In reality, these companies run a tax scam. They do not help their
clients with their case after pocketing large up-front fee. Tax Masters, Roni Deutch,
American Tax Relief and J.K. Harris are some of the fraudulent tax companies that
were running tax scams in the façade of tax resolution.
Tax Scams: Identity Theft
Identity theft used for stealing tax information of taxpayers is ever on the rise. The
information is used by scammers to file false tax returns on behalf of the taxpayer
and claim a refund. To steal information, scammers pose as a financial institution
or a reputed agency and ask taxpayers to share sensitive information such as social
security number, passwords, pin numbers etc. with them. Most taxpayers are not even
aware that they have been victimized till it is too late.
Tax Scams: Tax Preparer Fraud
Many American taxpayers use the services of a tax preparer to file their tax returns.
Although most tax preparers are honest, some misuse the information of their clients
to claim large refunds and charge inflated fees. When looking to hire a tax preparer,
taxpayers must check whether they have their Preparer Tax Identification Number
(PTIN). Every tax preparer must enter it on the returns s/he prepares. It helps the IRS
keep track of them.
Tax Scams: Frivolous Arguments
Many taxpayers fall victim to bad advice or choose to make claims that can only be
termed unreasonable. Taxpayers need to come up with convincing arguments to back
their case. Using frivolous arguments that have little to do with law will not help
taxpayers. To make a strong case, taxpayers are advised to hire the services of tax
resolution companies or tax professionals.
Tax Scams: Phishing
Phishing is used to run tax scams by sending out unsolicited emails holding link(s)
to a fake website that is used to extract personal and financial information from
unsuspecting people. This information can be used to steal funds from bank, file false
tax returns and obtain large refunds. Electronic tax scams are growing because it is
easy to carry out such scams.
Taxpayers need to remember that the IRS never sends out unsolicited emails. If it
looks fishy, it might just be.