The truth behind tax fraud alerts

by Mounica Kota | Feb 15, 2020 | IRS, Scams, Tax Abusive Promoters, Tax Frauds, Tax Return Preparer

The truth behind tax fraud alerts

Tax fraud and scams are becoming quite common in the US and the taxpayers need to be alert about these fraud scams. The IRS constantly warns the taxpayers to be cautious against these types of scams and frauds which can be very dangerous.In case of any scheme which is offering you exemptions from your obligations while paying taxes, you need to consult a tax professional or IRS before subscription to the scheme. The electronic filing of tax returns has made it easier for these tax scams to be operative frequently.

Let us find out some of the common tax frauds and scams occurring in the US.

Phishing

Tax scams can be considered as an illegal practice for avoiding the payment of taxes. These practices can result in imprisonment, payment of fines and tax re-payment along with fines. One of the common tax scams is Phishing which can be carried out by unsolicited email addresses or websites. These email addresses or websites act as legitimate websites for common people and lure them to provide their financial information. You should report about these tax scams such as receiving any emails from a source claiming to be the IRS, any monetary losses occurring due to the IRS, etc. to the IRS.

Abusive Tax Return preparer

You should be very careful while choosing a tax preparer for preparing his tax returns. Most of the tax return preparers will offer great services to their clients. However, some preparers can file fraudulent tax returns on your behalf and you are to be legally prosecuted for the tax returns. A tax return preparer can be defined as a person who can be a part of a partnership or a corporation and prepares for the compensation or a portion of refund or makes claims for refund under the provisions of the IRS. These abusive tax return preparers will use several fraudulent means for making illegal deductions which reduces your taxable income. Some of these dishonest means can be listed below.

Claiming of false dependents
Preparation of Schedule C by fraudulent means, claiming of the deduction for those expenses which have not been paid by taxpayers, income earned from other external sources of employment, etc.
Claiming of false Schedule E, Supplemental Income and Loss, etc.
Adding up false itemized deductions such as charity and medical, dental expenses.

There are some basic tips that you can follow to avoid such abusive tax preparers.

You should avoid tax return preparers who claim of obtaining larger refunds than others.
You should avoid signing blank tax form and must avoid return preparers who base their fees on the percentage of refund obtained.
You must consider a well-reputed tax professional that prepares your tax returns, provides you with a copy of the return and is also available for answering questions even after a long time of filing tax returns.

Abusive tax schemes

Tax evasions are very common nowadays especially by the use of foreign jurisdiction. These can involve several foreign and domestic trusts, partnerships, nominees, etc. These abusive tax schemes have gradually evolved into a fraudulent arrangement which gives the impression that you are not in control of your money and handed it over to some trusts. But, you will be receiving your funds through some other loans or your debit/credit card. These abusive tax schemes can involve banking offshore and can also lead to the establishment of scam corporations.

Some of the common abusive tax schemes which are quite common in the US are mentioned below

Abusive foreign trust schemes
International business corporations
False billing schemes

Non-filer Enforcement

Numerous individuals have continuously argued that the imposition of taxes on the citizens is illegal and should be voluntary. However, the IRS has always rejected these types of frivolous arguments and has imposed financial penalties on these individuals. You must be careful about these types of frivolous arguments.

IRS Lead Development Center

However, the IRS continuously works on keeping the common people safe from these tax frauds and scams. There are various educational materials and public awareness campaigns organized by the IRS for making the common people aware of these fraudulent practices.

Moreover, the IRS also organizes civil and criminal investigations which can result in penalties for those carrying such tax scams.

The IRS Lead Development Center also constantly works towards the eradication of these tax abusive promoters, fraudulent tax preparers and hence protects the common people.

Conclusion

Hence, tax scams, fraudulent tax preparers, and abusive tax schemes cause a lot of harm to the Government and the common people. It is necessary for taxpayers to be aware of these scams, educate themselves and report immediately to the IRS in case of any tax fraud.