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Tax Scam Targets Social Security Recipients in Ohio

September 6th

tax scamThe Internal Revenue Service has put out an alert, asking Social Security recipients in the state of Ohio to be on guard against a tax scam targeting Social Security recipients. These scams, in most cases, have been targeting elderly taxpayers, trying to entice them to file false tax returns.

The IRS has noticed a recent increase in tax-return-related scams involving senior citizens and others who normally do not have a filing requirement. Those affected most often live in the Midwest, though incidences are spreading nationwide to many other states, including Ohio.


How To Recognize Social Security Tax Scams

Those conducting these scams typically pose as tax return preparers or tax lawyers. They have mostly been targeting the elderly and others who receive Social Security benefits, as well as individuals who would not normally owe anything in tax. These taxpayers are fooled into believed they ought to file a tax return with the IRS. They are told they will receive money to which, in actuality, they are not entitled.

Potential victims should be wary of anyone claiming to be a tax professional, proposing large tax refunds. Scammers are using the false promises large refunds to lure victims into paying for the preparation and filing of the fraudulent tax returns.

Victims not only give away the funds to prepare the false returns, but also end up compromising their personal and financial information. This can leave them open to ID theft and other tax scams in the future. It is therefore extremely important to always ask for the credentials of any tax professional before handing over payment.




Avoid Falling Victim to Abusive Tax Schemes #3: Abusive Home-Based Business Tax Scams

September 2nd

The IRS is presently involved in extensive efforts to curb abusive tax shelter schemes and promotions. Home-based business schemes are considered abusive because they manipulate and misinterpret tax laws.

Home-based business scams generally operate by asserting that taxpayers can deduct most, or all, of their personal expenses as business expenses. Specifically, tax scams often involve the creation of fake home-based businesses or the appearance of such a business where none actually exists, followed by the erroneous deduction of individual or family expenses on federal tax returns.

Other schemes have been known to utilize a legitimate home-based business. In these cases, taxpayers might have a legitimate business, but they then either inflate their business expenses or falsely attempt to deduct personal living expenses.

Home-based business scams have gained significant popularity lately through promoters who sell them as a means of reducing taxes. Promoters typically market a package or other materials, claiming to show taxpayers how they can avoid paying income taxes. However, these claims are always false and such schemes are always illegal.

Penalties and Criminal Prosecution

The IRS is currently aggressively pursuing the successful prosecution of those who participate in such schemes, especially those who promote them. This includes the investigation of home-based business schemes.

Participation in home-based business schemes can result in IRS penalties, including the repayment of taxes owed with interest and fines. Other punishments could also include criminal prosecution and imprisonment. It is important to note that even innocent taxpayers involved in these schemes can face staggering amounts of back taxes and penalties.

Taxpayers involved in any of these scams should be certain to correct any incorrectly filed tax returns as soon as possible.


Avoid Falling Victim to Abusive Tax Schemes #2: Abusive Trust Scams

September 1st

The IRS estimates that by the year 2015, over $4.8 trillion in wealth will be inherited or transferred from one generation to the next. Much of this will be transferred through a variety of trusts. In fact, filing of trust returns are now the third most commonly filed income tax return behind individual and corporate returns.

Though the majority of these trusts are conducted legally, there is still a significant margin for fraud. With the recent rise in trusts, trust tax evasion schemes have also increased. Such scams are generally aimed at wealthy individuals, small business owners, and professionals such as doctors and lawyers who are most likely to pursue trust investment.

Commonly Promised Benefits of Anti-Trust Scams

The IRS has identified two basic kinds of anti-trust scams: the domestic package and the foreign package. Both sorts are generally promoted by a network of promoters and sub-promoters who have charged between $5,000 and $70,000 for their services. This fee enables taxpayers involved to have trust documents prepared, to utilize foreign and domestic trustees offered by promoters, and to use foreign bank accounts and corporations.

The promises made by trust scam promoters vary. However, these are some of the most common:

  • Reduction or elimination of income subject to tax
  • Deductions for personal expenses paid by the trust
  • The reduction or elimination of self-employment taxes
  • The reduction or elimination of gift and estate taxes
  • Depreciation deductions of an owner’s personal residence and furnishings

Taxpayers should be aware that trust arrangements will not provide the tax benefits promised by promoters. Furthermore, in many cases, participation in such scams may leave both the promoters and the taxpayers subject to IRS penalties.


Avoid Falling Victim to Abusive Tax Schemes #1: Anti-Tax Law Schemes

August 31st

With the recent IRS amnesty scheme, tax scams have become a topic of increasing concern among Americans. Many taxpayers feel worry that they will suffer IRS penalties for tax scams they may not have even known they were party to.

However, this does not need to be a problem. The IRS has provided a comprehensive list of existing abusive tax schemes, and advice on how taxpayers can avoid falling victim. With these tips, taxpayers can learn how to properly identify and steer clear of such scams.

What is an Anti-Tax Law Scheme?

One of the oldest and most prevalent forms of tax scam is the anti-tax law scheme. This scam encourages others not to comply with tax laws or IRS regulations.

Over the years there have been numerous attempts by individuals or groups to challenge the applicability of tax laws using a variety of arguments. In particular, assertions have been made that the Sixteenth Amendment was not properly ratified, that tax law is unconstitutional, and that tax law may only be applied to certain individuals.

Despite the courts having repeatedly rejected these arguments, there are those who continue to expound them, and even incur penalties for bringing frivolous cases into court or for filing frivolous tax returns. Such cases are often presented in a pseudo-legal format in an attempt to lure unsuspecting taxpayers into participating in their schemes.

Common Anti-Tax Law Scams

There are a few arguments that appear over and over in anti-tax law schemes. It is important to learn to recognize such arguments as false. Adherence to such advice can lead to violation of the tax code, and subsequent punishment through penalties and in some cases, even criminal prosecution.

The following arguments are the most common:

  • There is no Internal Revenue tax code that imposes taxes
  • Only “individuals” are required to pay taxes
  • Code Section 861 limits taxable income to certain sources which do not apply to most US citizens
  • The US government can assess taxes only against people who file returns

IRS Reports Tax Scams are On the Rise

August 15th

In recent months the IRS has seen a sharp rise in attempts to get taxpayers to file false claims for tax credits or rebates. These scams have been largely aimed at lower income taxpayers, those with The IRS has noticed these tax scams becoming a particular problem in the South and Midwest, often tied to local church groups. In such cases, advertisements are typically posted, claiming that so-called “free money” is available from the IRS. The scams go on to claim that little or no documentation is required in order to claim the money. Since these scams are often tied to church groups, this gives them an air of authenticity among many potential victims.

A number of schemes specifically targeting lower income or elderly individuals have been told they may be entitled to refunds based on excess Social Security benefits. Such scams typically inform victims they can transfer money directly into accounts from the IRS, with the only requirement being that the taxpayer fills out the requisite form.

How Can You Avoid Such Scams?

Though it can be surprisingly easy to be lured in by the promise of free money, don’t be fooled. Keep a careful eye out for the following, and you will be certain to avoid falling victim to a tax scam:

  • Avoid any offers that claim you can receive tax refunds or rebates without any documentation. The IRS will never hand out refunds without the appropriate information.
  • “Reconstructed” tax forms that misstate your income are a commonly used tool in tax scams.
  • Avoid any tax preparers who refuse to sign tax return forms.
  • Never give out any bank or personal information that is not directly related to your taxes. If a tax refund offer asks for any of this information, it is most likely a scam.
  • Never give out any large, upfront payments for services from tax preparers. Tax scams in these cases will often use fake companies or falsely claim that services will be delivered overnight.

Three Scams Every Taxpayer Should Know About

August 8th

In 2011 the IRS issued a list of the top 12 tax scams, known as the “Dirty Dozen.” These scams are all illegal and all come with severe penalties if caught. The following three in particular are all scams that the IRS is being particularly aggressive about pursuing, and are things that every taxpayer should be aware of.

Phishing Scams

Phishing Scams typically entail the use of false emails, websites or phone calls to trick unsuspecting victims into revealing their personal information. Often these sorts of scams will threaten nonexistent audits or investigations, or offer fake rewards, in order to gather this information.

Unfortunately, many people do not realize that the real IRS would never utilize these sorts of methods in order to gather taxpayer information. Phishing scams use the personal and financial information of their victims in order to access bank or credit card accounts.

 Hiding Income in Offshore Accounts

In recent years the IRS has become increasingly aggressive in its pursuit of those who attempt to evade United States income tax by hiding money in offshore accounts. The IRS has begun a serious crackdown on those who conduct abusive offshore transaction or even those who do not participate, but rather enable these sorts of schemes.

In February, 2011 the Internal Revenue Service announced its second voluntary disclosure act, which would allow transgressors to legally bring offshore money back to US bank accounts. This act will be available to the public through the end of August, 2011.

Filing False or Misleading Forms

It remains a common scheme for scammers to utilize information from family or friends to falsify their own tax returns in order to gain improper tax refunds. It is important to be aware and never accede to requests for such data. Also, be careful never to claim deductions or tax credits to which you are not entitled or willingly allow others to use your information to claim false refunds.

Even just participating in such schemes can lead to prosecution. IRS penalties these days include fines or even criminal prosecution.


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