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IRS, tax time scams 2012: Tax attorney warns you what to look for

paperstack032312_opt_1BY TOM PERIĆ
NEWJERSEYNEWSROOM.COM

Philadelphia — As the tax deadline looms, scam artists are looking to prey on unsuspecting business owners and citizens. During tax season, you should be particularly wary.

Philadelphia-based attorney Christopher Ezold warns that everyone should be aware of the Internal Revenue Service’s “Dirty Dozen” list of scams to protect themselves from theft and fraud. “Tax scams occur throughout the year, but during tax season, missteps can be easier to make,” says Ezold, a partner with The Ezold Law Firm. “The best way to protect yourself is to be informed and to seek advice when you feel confused or suspicious.”

For more financial advice, check out NJNR's new Personal Finance Page.

The Dirty Dozen listing, compiled by the IRS each year, lists a variety of common scams taxpayers can encounter year-round. Many of these schemes peak during filing season as people prepare their tax returns.

The 2012 Dirty Dozen include:

Identity Theft — According to Javelin Strategy & Research, identity theft rose 13 percent from 2010 to 2011. Ezold says the trend has continued into 2012, and “any time you receive a request for personal or tax information, immediately be suspicious. Only give that information to your trusted advisor.”

Return Preparer Fraud — Unethical tax return preparers have skimmed off their clients’ refunds, charged inflated fees for tax return preparation services and attracted new clients by promising guaranteed or inflated refunds. Taxpayers should choose carefully when hiring a tax preparer. Seek an adviser with a Preparer Tax Identification Number (PTIN). Better yet, hire a Certified Public Accountant (“CPA”).

Hiding Income Offshore — Some taxpayers have attempted to evade taxes by hiding income in offshore banks, brokerage accounts or nominee entities using debit cards, credit cards or wire transfers to access the funds. Others have employed foreign trusts, employee-leasing schemes, private annuities or insurance plans for the same purpose. The government is putting heavy pressure on foreign organizations and governments to reveal the identities of these tax cheats – and it’s working. Tax havens are dwindling fast.

Phishing — Any unsolicited email for valuable personal and financial information is almost certainly a scam.

“Free Money” from the IRS and Tax Scams Involving Social Security — There is no such thing as free money from the IRS.

False/Inflated Income and Expenses — Claiming income you did not earn or expenses you did not pay in order to secure larger refund will have serious repercussions if you are audited. The IRS randomly audits thousands of taxpayers a year; be prepared.

False Form 1099 Refund Claims — Don’t fall prey to people who encourage you to claim deductions or credits to which you are not entitled or willingly allow others to use your information to file false returns. Even if you don’t receive the false refunds, you’ll be in just as much trouble.

Frivolous Arguments — Scammers encourage taxpayers to make unreasonable and outlandish claims to avoid paying the taxes they owe. “Sovereign” individual claims and arguments that the Constitution prohibits taxation, for example, have all been dealt with by the courts and the federal government and do not work. People advocating those positions have gone to jail for tax evasion.

Falsely Claiming Zero Wages — Filing a phony information return is an illegal way to lower the amount of taxes an individual owes.

Abuse of Charitable Organizations and Deductions — Another scam is the abuse of forming 501(c)(3) organizations, to shield income or assets from taxation, and attempts by donors to maintain control over donated assets or the income from donated property.

Disguised Corporate Ownership — Third parties are improperly used to request employer identification numbers and form corporations that obscure the true ownership of the business.

Misuse of Trusts — Unscrupulous promoters urge you to transfer assets into trusts, which are used as a means of avoiding income tax liability and hiding assets from creditors, including the IRS.

“Taxpayers should be careful and avoid falling into a trap with the Dirty Dozen,” said IRS Commissioner Doug Shulman. “Scam artists will tempt people in person, online and by email with misleading promises about lost refunds and free money. Don’t be fooled by these scams.”

For more information about tax and IRS-related issues, contact Christopher Ezold at 610-660-5585, This e-mail address is being protected from spambots. You need JavaScript enabled to view it or visit www.ezoldlaw.com.

For a complete listing of the IRS Dirty Dozen Tax Scams for 2012, click here.

 

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