Tax Season - Time for Scams

As tax season draws irresistibly closer, the scam artists are polishing their latest techniques. This article should help you keep an eye out for these nasty individuals.

Tax Season – Time for Scams

In a particularly cheeky move, scam artists have started posing in on form or another as the IRS in an effort to get you to turn over social security numbers and such. Logically, this actually makes sense. Everyone is terrified by the IRS and dread be contacted by the  Agency. Most of us would do anything to resolve any issue raised by an IRS Agent including sending them copies of credit card statements and providing crucial financial information over the phone. Put another way, this is the perfect scenario for a scam artists.

The goal of scam artists, of course, is to get private information they can use to open credit card accounts and so on. This is loosely known as phishing for the purpose of identity theft. 

Phishing and identify theft can occur through practically any communication method. Here are some recent scams that were successful:

1. One group of scam artists started sending spam emails notifying taxpayers they were eligible for tax refunds. The scam worked because the emails were sent from IRS types of email accounts including the irs letters in the address. Taxpayers were then told to go to click through to a site where they could fill out a form and get their refund. Of course, the email address and web site were fakes. Nobody got a refund, but the scam artists received a bevy of social security numbers, credit card information and so on.  In total, this scam occurred through 12 different web sites in 11 countries.

2. This one is a classic. Scam artists send bogus IRS letters and Form W-8BEN asking non-residents to provide personal information including bank account numbers, PINs, passport numbers and so on. Form W-8BEN is used by banks, not the IRS, to obtain information from non-residents who are opening bank accounts! Unfortunately, many non-residents fell for this scam and had their identities stolen. 

There are a couple of guidelines you can use when dealing with IRS communications. First, the IRS never, ever sends email to taxpayers. NEVER! If you get an email communication, it is absolutely a scam. Delete it or send it to the IRS so they can take action.

If you receive mail communications from the IRS, call the agency to verify a letter was really sent to you. With phone call communications, get the persons name and call them back at the IRS. Both methods will stop scam artists in their tracks. Be skeptical of communications you receive from sources you are not expecting.

Finally, the IRS never asks a taxpayer for passwords or PIN numbers. If the agency desires to seize your bank account, they can just do it. They don’t need to take out $300 a  day until your tax debt is collected! 

Scam artists are highly creative people. If you have doubts about an communication of the IRS, pick up the phone and call the agency.

2010 List of Tax Scams Released by IRS

Every year, the IRS issues a account of tax scams. The ambition is to active taxpayers to the abridgement of arete of assertive strategies as able-bodied as absolution anybody apperceive the IRS will not acquire them.

2010 Scams

The IRS has kicked out its annual list of highly dubious tax scams for 2010. Promoters often make these strategies sound credible, but they simply aren’t. If a taxpayer attempts to use one of the scams, the IRS will audit and aggressively attack the taxpayer as well as try to identify the promoter for prosecution.

The 2010 list of scams contains most of the traditional claims. There are, however, three new areas being targeted by the IRS. They and a few others are highlighted in the following list.

Two new schemes have worked their way onto the list in 2010. In recent months IRS personnel have noted the emergence of the two scams––“zero wages” and “Form 843 tax abatement”–– in which filers use IRS forms to claim that their tax bills have been wrongly inflated.

Also high on the list in 2010 is “phishing,” a favorite ploy of identity thieves. Over the past few years, the IRS has observed criminals working through the Internet, posing even as representatives of the IRS itself, with the goal of tricking unsuspecting taxpayers into revealing private information that can be used to steal from their financial accounts.

1. Zero Wages – A new addition to the list, the zero wages scam is designed to create a log jam in the system. A taxpayer is supposed to file a tax return with no wages claimed and notice of challenges to any W-2 or 1099 wage reports. In essence, the idea is to not pay taxes while the IRS tries to figure out what is going on. Ultimately, the goal is to get the IRS to accept a zero income tax return, which of course requires no payment of taxes.

2. Form 843 Tax Abatement – The tax abatement strategy is very creative. It is typically used for taxpayers who have failed to file taxes for a few years. In such a situation, the IRS will often assess taxes to the individual based on a variety of factors. The strategy is to abate this assessment and pay not tax by challenging the assessed amount as being calculated incorrectly. The IRS says it doesn’t fly, but it is a very creative strategy. 

3. Identity Theft/Phishing. This isn’t so much a tax reduction scam as a nightmare wherein identity thieves try to obtain information from taxpayers by acting as IRS agents. Often they send out email as though they are from the IRS.  The IRS never sends emails to taxpayers, so don’t respond to these emails. If you’re not sure, call the IRS and ask them if there is a problem. You can reach the IRS at 800-829-1040.

4 Credit Repair Companies – You see these companies everywhere. Some are legitimate while others are not. The ones that are not charge high fees and do almost nothing other than putting taxpayers on some kind of a payment plan. The IRS is currently revoking the tax-exempt status of many credit repair companies. 

5. Offshore Strategies – A traditional area of angst for the IRS, offshore strategies continue to be closely watched. The IRS is hyper sensitive to such strategies and tries to shut them down. In 2005, 68 individuals were charged and convicted for promotion offshore tax scams and thousands of taxpayers were audited with nightmarish results.  If you want to go offshore, make sure you get qualified advice from a tax professional and attorney. Don’t buy something off a web site.

There is a fine line between tax evasion and tax avoidance. Tax avoidance is legal while tax evasion is criminal. If you wish to pursue advanced tax planning, make sure you do so with the advice of a tax professional that is going to defend the strategy to the IRS.