Tax-Time Scams
You work hard for your money. You deserve to keep as much as you can. With tax season upon us, guard against scammers and schemers who may want to dip into your pocket.
Phishing For Information
In this scam, identity thieves pretend to be the IRS in an attempt to steal personal information including Social Security numbers, credit card numbers and financial information. Typically these phishing efforts are fake e-mails that urge a fast response. Fraudsters have also been known to place phone calls to potential victims. The IRS does not use e-mail to initiate contact with taxpayers about issues. If you have any doubt whether communication from the IRS is authentic, call the IRS at 800.829.1040 to confirm.
"Tax Refund" Loans
These have many names: Advance Refund Loans, Refund Anticipation Loans and Rapid Refund Loans are just a few. They're hyped with the promise that your refund can be processed and received within 48 hours. The reality is that these are short-term, high-interest loans that cost you money. If you want your money faster, sign up for Direct Deposit of your tax refund.
Don't pay for bad advice
There are books, DVDs and even some unscrupulous tax preparers that can steer you down the wrong path. Avoid any advice that suggests you enter all zeros on your federal income tax filing forms or amend your earned income W-2 form for the year to zero. Zero Return or Zero Wages advice is simply wrong. It can be viewed by the IRS as tax evasion and can be punishable by law.
Similarly, do not pay for or heed any advice that suggests paying taxes is either voluntary or unconstitutional. One such claim says that the Sixteenth Amendment, granting congressional power to collect income tax, was never ratified and therefore, paying taxes is voluntary. Similar falsehoods assert that filing Form 1040 violates a person's Fifth Amendment right against self-incrimination or the Fourth Amendment right to privacy. All these arguments have been thrown out of court.
Don't pay too much.
If you're going to use a tax preparer, do your homework and get a fee schedule before your taxes are done. Some tax preparers skim portions of a taxpayer's refund by charging high fees for assisting with tax returns.
There is a fine line between tax evasion and tax avoidance. Tax avoidance is a legal use of the tax code to reduce the amount of taxes paid to the IRS by claiming appropriate deductions. Tax evasion is criminal. If you wish to pursue advanced tax planning, make sure you do so with the advice of a tax professional. To report suspected tax fraud activity, send a completed Form 3949-A, Information Referral, to Internal Revenue Service, Fresno, CA 93888. You can download the form or call the IRS at 800.829.3676 to order by mail.