Wow that headline sounds wrong! However it IS accurate. Many taxpayers have been clamoring to hear about the IRS' "Dirty Dozen" Tax scams for 2015. So here is a rundown for all those wishing and hoping for a little one on one time with the Internal Revenue Service.
- Offshore tax cheats. Nothing in recent years has got the IRS' attention more than foreign bank accounts. Report it and don't be brave. They are coming aggressively and are really pissed about this. The crackdown is not just on drug dealers and human trafficking, they also care about your tidy nest egg that OOPS! hasn't been reported in the Caymans.
- Charities: Inflated charitable donations and bogus organizations are a sure fire way to garner the attention you want. The IRS is pretty adept at monitoring a taxpayer's regular charity levels and they LOVE to audit you on the charitable disbursements you "say" you made. Also scammers operate bogus charities that may take your money and run. Please be vigilante and do your research at reputable search organizations likehttp://www.charitynavigator.org before donating.
- Abusive tax structures: You walk into a practitioner's office, he or she "wows" you with a complicated and seemingly ridiculous network of LLCs and S-corps and foreign holding companies that will transfer your funds into oblivion. It IS too good to be true, such structures are rarely sound and not only cost a bundle for the "professional" to "create" for you, but will eventually collapse under its own weight when the IRS finds it. Then you'll owe the tax, incur penalties and interest, and receive an all-expense paid stay at a 1 star Federal resort. Oh, and that "professional" will still have made his money.
- The Fuel Tax Credit. Your motorcycle does not qualify, no matter what your friend Derrick told you. Tax free fuel circumstances are for farming equipment, boats, trains airplanes etc. SOME commercial uses are nontaxable, but not your Hummer no matter the ridiculous fuel costs.
- Frivolous Arguments. While we do live in a "Voluntary Tax Regime" filing a tax return is not I know it is confusing but those are the facts. Income is money that you receive as compensation. The Federal government is allowed to tax you. If you don't file and make these arguments no matter your strong anti-tax stance, they will make you pay, figuratively and literally.
- False income for tax credit. Tax breaks are the best, they are much better than deductions, a deduction can lower taxable income, but a credit lowers the actual tax bill. Refundable credits get you money back. So claiming income you did not earn to get a refund from an "earned income tax credit" is a big mistake. The IRS knows who the players are, the scammer methods are repetitive and easy to find. Don't be fooled by someone who makes the claim that they can get you this money.
- Return preparer fraud. This one is for practitioners as well as laymen. To practitioners: don't do this, A: its mean, B: you will get caught and go to prison. These days with computer analysis they can find you fast. Laymen Taxpayers: Beware of the guy making fancy promises on your $50 dollar return, he's not such a genius and working in the back of a laundromat. If his hair is a little too gelled and his tax knowledge seems to be that you will get back a HUGE refund no matter what, please run.
- Fake Documents: Avoid falsifying 1099s or other tax documents. Most tax documents are twin copies, you get one and the IRS gets the other. Therefore the IRS can quickly root out the fake. While in normal relationships lying about yourself can lead to a breakup, with the IRS being fake will get you that long term monogamous relationship.
- Inflated Refund Claims. This is similar to return prepare fraud but more focused. There is no way to get free money from the IRS. Anyone that tells you different is lying to you. When someone tell you they can get you a fat check from extra dependents, or over the top expenses, please grab you stuff and run.
- Phishing. The IRS does not send emails. Seriously, you cannot email anyone at the IRS and they won't email you. When they log into their computers they still have the AOL yellow running man slowly running throughout the dialup process. So should you receive an email about your bill, refund or quick way to file your taxes, delete it.
- Identity theft. This is serious, identity theft is rampant and you need to be mindful of it. Scammers can use your information to file fraudulent returns and get huge paydays, placing you on the hook. The mess can be incredibly difficult to sort through. Always be vigilant with your personal information.
- Lastly, and my personal favorite: Phone Scams. Some people are SO eager to meet the IRS they get sucked into the new telephone scam. These aggressive scammers call unsuspecting victims with wild claims of criminal prosecution, with the only "out" being immediate credit card payments to whatever random account they own. The IRS does not do this. They will send you letters, they will show up at your house, they will come to your business. They will not call you and ask you to give them your credit card information. Period.
So that's it, the top 12 ways to win a date with the IRS. Stay safe this Tax Season my friends and should you run afoul of any of the above please call a proper tax professional immediately.
Benjamin Goldburd is an Associate at Goldburd McCone LLP a boutique tax law firm in New York City.
For more information on these and other tax issues feel free to contact our offices at 212-302-9400, or on the web at www.goldburdmccone.com.