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Be on Alert to Avoid the Top-12 Tax-Related Scams by Joseph L. Saka, CPA/PFS

Posted on May 06, 2018 by Joseph Saka

The April tax filing deadline has passed, but taxpayers are still at risk of falling victim to tax-related fraud and identity theft schemes that continue throughout the year. Following is a list of the top-12 scams that the IRS identified for 2018.

  • Identity Theft. If criminals gain access to your personal information, such as your Social Security number, they can steal your identity to file fraudulent tax returns in order to claim a refund before you do. Never give your personal information to anyone you do not know, and take precautions to protect your sensitive information stored on computers, mobile devices and online financial sites.
  •  Phone Scams. The IRS will never make an unsolicited telephone call to a taxpayer to request personal information or to threaten the taxpayer with arrest or deportation for unpaid tax liabilities. If you receive a call from someone claiming to be from the IRS, hang up without providing any details about yourself.
  • Email Phishing Scams. Phishing occurs through unsolicited emails or fake websites that lure potential victims into clicking on links and divulging personal and financial information. Often, the emails come from criminals posing as a bank or other legitimate institution you know. To avoid falling victim to phishing attacks, remember that that the IRS will never initiate contact with a taxpayer to request personal information, and such personal data should never be shared via email or text message.
  • Tax-Return Preparer Fraud. Consumers must do their homework before engaging the services of a tax preparer to ensure that the individuals they choose to work with are in fact qualified and are not among the many scam artists that pose as legitimate professionals. Never sign a blank tax return. Before sharing any of your personal information with a new tax preparer, ask for an IRS Preparer Identification Number and search the IRS database of credentialed professionals at https://irs.treasury.gov/rpo/rpo.jsf
  • Falsely Inflating Refunds. In order to yield a higher refund from the U.S. government, taxpayer and their return preparers may falsely report artificially low income or report credits, deduction or exemptions that you are not legally qualified to claim.
  • Falsely inflating income in order to qualify you for a refundable tax credit to which you are not legally entitled.
  • Falsely padding deductions to create a larger refund than you are entitled to or to reduce the amount of tax you are required to pay.
  • Improperly claiming business credits to which you are not entitled.
  • Making frivolous tax arguments in an effort to reduce your tax liability or defend against fraudulent claims.
  • Abusive Tax Shelters. Hiding income and structuring assets to avoid taxes is illegal. The IRS is especially concerned about the use of schemes involving the use of “micro-captive” insurance structures that do not meet the true attributes of an insurance product.
  • Fake Charities. It is common for scammers to take advantage of a natural disaster or other national issue and develop fake charities though which they solicit donations from the unsuspecting public. Before opening your heart and your wallet, verify that the organizations is a qualified charity with the IRS. If you are unsure, refocus your donation to well-established charities.
  • Hiding Money Offshore. While it is perfectly legal to hold assets in offshore banks and brokerage accounts, you are responsible for reporting and paying applicable U.S. taxes on those assets. If you previously failed to report foreign financial assets, you have until Sept. 28, 2018, to voluntarily disclose this information to the IRS and avoid criminal prosecution. After this date, the IRS will end its Offshore Voluntary Disclosure Program (OVDP).

About the author: Joseph L. Saka, CPA/PFS, is CEO of Berkowitz Pollack Brant, where he provides a full range of income and estate planning, tax and business consulting and compliance services, and financial planning expertise to entrepreneurs, high-net-worth families and family companies and business executives in the U.S. and abroad. He can be reached at the CPA firm’s Miami office at (305) 379-7000 or via e-mail at info@bpbcpa.com.

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