IRS Warns of Top Tax Schemes for 2019 by Edward N. Cooper, CPA

Posted on April 05, 2019 by Edward Cooper

By Edward N. Cooper, CPA

The IRS has issued its annual list of the Dirty Dozen scams that taxpayers should look out for in 2019. Under U.S. laws, taxpayers are legally responsible for the information contained in their tax returns, even when those documents are prepared by someone else. Therefore, it is critical that you take special care when selecting a tax preparer and reviewing your returns for errors. Your best defense to avoid falling victim to these scams is to learn how to spot them and remain vigilant throughout the year.

Phishing Attempts. Criminals are skilled as creating official-looking emails and websites that trick individuals into divulging their personal information. Taxpayers should be wary of all emails and text messages that request they log in to an established account or that ask for sensitive information, such as their social security or tax ID number. Moreover, remember that the IRS will never contact you via email or text, and any message purporting to come from the agency is most likely a scam.

Phone Scams. There has been a steady increase in phone scams in which criminals impersonate the IRS or claim to be IRS debt collectors in order con taxpayers into sending them bogus tax payments. Learn how to recognize these schemes and take extra precautions to protect yourself.

Identity Theft. Tax-related identity theft occurs when someone uses a stolen Social Security number or Individual Taxpayer Identification Number (ITIN) to file a fraudulent tax return and claim a refund. Safeguard your personal information and regularly review your credit report for signs of theft.

Tax Preparer Fraud. While the vast majority of tax professionals provide honest, high-quality service, there are some prepares who operate solely for the purpose of scamming taxpayers, perpetuating identity theft and reaping the benefits of refund fraud.

Inflated Refund Claims. Be wary of tax preparers who ask you to sign blank tax returns, promise you a refund before looking at your records or charging you fees based on a percentage of the refund. Do your homework and check references before selecting a tax preparer.

Falsifying Income to Claim Credits. Con artists have been successful in convincing taxpayers to invent income to erroneously qualify for tax credits, such as the Earned Income Tax Credit. To avoid significant tax bills and penalties and interest, make sure that you verify the accuracy of the information contained in the tax return you file with the federal government.

Falsely Padding Deductions on Returns. Think twice before overstating deductions, such as charitable contributions and business expenses, or improperly claiming credits, such as the Earned Income Tax Credit or Child Tax Credit, in an effort to reduce your bill or inflate the amount of your tax refund.

Fake Charities. Before making donations to charitable organizations, take the extra time to confirm that the group asking for a contribution is, in fact, a qualified and legitimate non-profit agency. A complete search is available on the IRS website.

Excessive Claims for Business Credits: Avoid improperly claiming tax credits, such as the fuel tax credit and the research credit, unless you satisfy the requirements to legitimately use them.

Offshore Tax Avoidance. Hiding money and income offshore has been the target of a wide sweep of successful enforcement actions. The best option for avoiding penalties and potential criminal prosecution is to come clean and voluntarily report offshore assets.

Frivolous Tax Arguments. While taxpayers do have a right to contest their tax liabilities, they should avoid using frivolous tax arguments or other unreasonable schemes to avoid their tax liabilities. The penalty for filing a frivolous tax return is $5,000 and felony prosecution.

Abusive Tax Shelters. The vast majority of taxpayers pay their fair share to the federal government. However, it is not uncommon for individuals to fall victim to con artists who scam them into using abusive tax structures. Always seek the opinion of professional counsel when faced with a complex tax-avoidance product.

About the Author: Edward N. Cooper, CPA, is director-in-charge of Tax Services with Berkowitz Pollack Brant, where he provides business- and tax-consulting services to real estate entities, multi-national companies, investment funds and high-net-worth individuals. He can be reached at the CPA firm’s Ft. Lauderdale, Fla., office at (954) 712-7000 or via email at

Information contained in this article is subject to change based on further interpretation of tax laws and subsequent guidance issued by the Internal Revenue Service.