The IRS “Dirty Dozen” for 2014

Another year, another Dirty Dozen from the IRS. Yes, as usual, the IRS has released its “Dirty Dozen” list of tax scams. The list doesn’t change that much each year; typically the methods become more sophisticated, but the intent is much the same. So it goes with the 2014 list, where the IRS highlights the following schemes:

  1. Topping the list is Identity Theft. Despite efforts by the IRS to reduce this, it’s still a major issue. Check out the IRS Identity Protection area of their website for ways in which you can protect yourself.
  2. Pervasive Telephone Scams are next on the list. This is where callers pretend to be from the IRS in the hope of gaining information from their victims that will allow them steal money or identities. There has been a definite increase in this area, including more legitimate-sounding callers, threats of jail, follow-up calls from people claiming to be from the police, and so on. Even if you’re aware that you really owe taxes, it does no harm to call the IRS yourself (1-800-829-1040) so that you’re sure you are talking to a real IRS representative.
  3. Most people are aware of Phishing scams, where you receive a bogus, but very real-looking, email that takes you to a fake website asking for information. Amazingly, many people still fall for these schemes. Always remember, the IRS will never initiate contact through electronic media, such as emails or text messages (or should that be “taxed messages”?).
  4. Please, do not be fooled by Offers of “Free Money” or Inflated Refunds, such as fictitious rebates, benefits, or tax credits. Scammers typically pose as tax preparers and will charge their victims for falsified returns, and you could even end up being penalized – remember, you are responsible for your return, regardless of who prepared it.
  5. Connected with the previous point is Return Preparer Fraud. Approximately 60% of taxpayers have their returns prepared by tax professionals and, since you are legally responsible for your return, you should make sure you choose a legitimate preparer that will sign the return they prepare and enter their IRS Preparer Tax Identification Number (PTIN).
  6. Are you Hiding Income Offshore? This doesn’t have to be the rich tax evader who is intentionally trying to hide assets. If you have any assets abroad then you are legally required to disclose the information, including Report of Foreign Bank and Financial Accounts filings.
  7. The Impersonation of Charitable Organizations scam crops up regularly on the list. This is perhaps one of the worst items, where, especially following a natural disaster, scammers use phone calls, emails, and false websites to solicit money from donators, or claiming to help the victims file casualty loss claims and get tax refunds. If you want to help disaster victims, be proactive, contact a recognized charity or disaster helpline, and don’t give out personal information.
  8. While it is expected that you will claim everything you’re legitimately entitled to, do not claim False Income, Expenses or Exemptions. This can result in interest, penalties, or even prosecution.
  9. The IRS Tax Code is ridiculously long and most people agree that it needs to be overhauled. However, nothing is hidden – the entire tax code is published for everybody to see, so there’s no excuse for making what the IRS refers to as Frivolous Arguments to try to evade or defeat your tax obligations. Do not try to do so and do not be fooled by people that promote such frivolous arguments.
  10. It’s actually pretty simple, do not fall victim to people who encourage you to claim deductions or credits to which you are not entitled. This includes listening to people who encourage you to claim deductions or credits to which you are not entitled, such as Falsely Claiming Zero Wages or Using False Form 1099; two scams that can get you into a great deal of trouble. These complex schemes, which include filing false documents to justify bogus claims, are pretty easy to spot. If it seems too good to be true, it probably is.
  11. While this scam won’t affect too many taxpayers, Abusive Tax Structures are a problem that the IRS is trying to tackle. These complex schemes often involve multiple offshore entities, credit cards, etc. Buying into any arrangement that promise to eliminate or substantially reduce your tax liability is probably a bad idea and could result in criminal prosecution.
  12. Often connected with abusive tax structures, the IRS is seeing an increase in the Misuse of Trusts and related questionable transactions. While there are many legitimate uses for trusts, if they are used as a means of avoiding income tax liability and hiding assets you’re probably going to end up in trouble.

As always, these are just some of the schemes in use, so please take care when dealing with tax issues and/or giving out any personal information.