By Kevan P. McLaughlin
Every year, the Internal Revenue Service publishes the 12 most common scams and other illegalities that taxpayers could encounter — a “dirty dozen” list. They come in a variety of different categories.
The first group is identity theft. Somebody intercepts a taxpayer’s sensitive information to either steal their identity for other purposes or prepare fraudulent tax returns to claim refunds using their Social Security numbers and other information.
Another category is email phishing scams in which nefarious actors try to gain access to sensitive information at tax season, either by posing as tax professionals or IRS personnel.
Phone scams also find their way onto this dirty dozen. These situations cover bad actors who try to impersonate IRS personnel and threaten taxpayers in an attempt to extort money or other things of value.
Then there are scams that show up on a return itself, such as frivolous entries, constitutional arguments, and fraudulent or fictitious charities. Those scams always make it to the dirty dozen list.
Tax professionals themselves could be involved in a dirty dozen fraud. This includes excessive refunds or credits, erroneous deductions and understated income. If a taxpayer is presented with a refund that they can’t explain or understand, that might be evidence of a scam.
And then finally, the dirty dozen list usually includes some type of offshore alert just to remind taxpayers that the United States taxes worldwide income and any attempt to move money overseas may in fact be evidence of a scam. My firm has helped many clients, some innocent and some not, who failed to report offshore funds. In years past, some organizations promoted fraudulent schemes involving foreign credit cards.
So as you complete your taxes this year, be warned. If some tax strategy sounds too good to be true, it probably is.
As the founder of McLaughlin Legal, San Diego tax attorney Kevan P. McLaughlin focuses his practice on all aspects of Federal and California tax law, with a particular emphasis on representing taxpayers in civil and criminal tax litigation and controversy cases.
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