The Dirty Dozen: Tax Scams to be Aware of in 2017

Each year the IRS finds the most common scams to avoid for the upcoming year. In an effort to help taxpayers, they highlight the list of various schemes taxpayers may encounter through the year, many of which peak during tax season.

This past year saw a large spike in phishing and malware, as well as a dangerous evolving W-2 scam that targeted corporations, school districts, and other private and public concerns. Many scammers are trying to trick taxpayers into filling out fraudulent tax return forms to get sensitive information. The IRS saw over 5,000 victims of phone scams last year who collectively paid over $26.5 million because of the scam involving criminals making threats over the phone. To avoid some of the scams from 2016 and stay ahead of the 2017 scams, the IRS releases a “Dirty Dozen” list of common tax fraud they see and search out each year.

2017 “Dirty Dozen” Tax Fraud and Scams

  1. Phishing: Taxpayers need to be on guard against fake emails or websites looking to take personal information. The IRS will never initiate contact with a taxpayer via email about a bill or refund. Be wary of emails and websites that seem to be nothing more than scams to steal personal information.
  2. Phone scams: Phone calls from criminals impersonating IRS agents remain an ongoing problem. There has been a recent surge in these calls with con artists threatening taxpayers with police arrest, license revocation and deportation. Do not fall for these scams.
  3. Identity theft: Identity theft is a major problem to look out for around tax time. Taxpayers need to be extremely cautious. The IRS is aggressively pursuing criminals who file fraudulent returns using someone else’s Social Security number.
  4. Return Preparer Fraud: Be on the lookout for dishonest preparers who set up shop each filing season to perpetrate refund fraud, identity theft, and other scams. Most tax professionals provide honest high-quality service but do some research before hiring a tax professional.
  5. Fake Charities: Be on guard against people or groups pretending to be a charitable organization to attract donations from unsuspecting contributors. IRS.gov has the tools taxpayers need to check out the status of charitable organizations. Be wary of organizations with names similar to familiar or nationally known organizations.
  6. Inflated Refund Claims: Taxpayers should be on the lookout for anyone promising inflated refunds. Anyone who asks taxpayers to sign a blank return promises a big refund before looking at their records or charges fees based on a percentage of the refund has a good chance of being fraudulent.
  7. Excessive Claims for Business Credits: Avoid improperly claiming the fuel tax credit. The credit is usually limited to off-highway business use, including use in farming. Taxpayers should avoid misuse of the research credit.
  8. Falsely Padding Deductions on Returns: Avoid the temptation to falsely inflate deductions or expenses on your return to pay less than what is owed or to receive a larger refund. Think twice before overstating deductions or improperly claiming credits like the Earned Income Tax Credit or the Child Tax Credit.
  9. Falsifying Income to Claim Credits: Don’t invent income to try to qualify for tax credits, such as the Earned Income Tax Credit. Taxpayers should file the most accurate return possible because they are legally responsible for what is on their taxes. This scam can lead to taxpayers facing large bills to pay back taxes, interest, and penalties.
  10. Abusive Tax Shelters: Don’t use abusive tax structures to avoid paying taxes. The IRS is committed to stopping complex tax avoidance schemes and the people who create and sell them.
  11. Frivolous Tax Arguments: Don’t use frivolous tax arguments to avoid paying tax. Promoters of frivolous schemes encourage taxpayers to make unreasonable and outlandish claims even though they have been repeatedly thrown out of court. The penalty for filing a frivolous tax return is $5,000.
  12. Offshore Tax Avoidance: Recently, enforcement actions against offshore tax cheats show that it’s a bad bet to hide money and income offshore. The IRS offers the Offshore Voluntary Disclosure Program to let people catch up on their filing and tax obligations.

Need Help With your 2017 Taxes?

At Executive Accounting Services, Inc. we understand the importance of keeping your finances in order without losing tons of business hours. As your personal and business accounting partner, we take care of all your accounting, bookkeeping, and record keeping needs so you can get back to the business of growing your business. Explore our full range of services, including payroll outsourcing, small business tax preparation, budgeting and even collections. Contact us today to find out how we can help you manage your finances or give us a call at (919) 859-8600.

Terri Benforado

Terri is the founder and president of Executive Accounting Services and has more than 15 years of experience in accounting services, accounting management, accounting consulting, accounting training and tax preparation. She is a Certified QuickBooks® Pro Advisor in all versions, which ensures you are working with a trained and qualified professional of the QuickBooks® software. Her experience in the accounting field includes accounting management of a $15 million dollar company to accounting management of companies under $1 million dollars.

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