Beware of tax scams based on bogus credits, deductions
DALLAS—The Internal Revenue Service has become aware through various sources that taxpayers are being victimized by individuals pretending to be legitimate tax preparers. These “preparers” are luring taxpayers into filing fraudulent returns by promising larger than normal refunds while charging exorbitant fees. The IRS issued its annual “Dirty Dozen” list of scams in March which once again, included return preparer fraud.
Reports received indicate that the typical victim is usually not required to file a return in the first place but is lured in by the promise of a large refund. The “preparers” will create false income, deductions or credits to maximize the refund. Recently, the IRS learned of a scam involving bogus claims for veterans’ disability benefits. Last year, promoters falsely claimed that they could obtain a tax refund or nonexistent stimulus payment for their victims based on the American Opportunity Tax Credit, even if the victim was not enrolled in or paying for college.
Taxpayers are legally responsible for what’s on their returns even if it was prepared by someone else. Taxpayers can be liable for additional tax, interest, and penalties due and subject to criminal prosecution, if complicit in the scheme. In addition, victims who obtain refunds illegally could put some federal benefits to which they may be entitled to at risk.
“While most return preparers provide honest service to their clients, the unscrupulous prey on unsuspecting taxpayers by luring them into filing returns promising large refunds,” said Clay Sanford, an IRS spokesman in Dallas. “These preparers ask for little or no documentation, do not provide copies of returns, and may be long gone by the time the victims realized they have been duped.”
The IRS wants to remind taxpayers to be careful when choosing and hiring an individual or firm to prepare their return. Among many factors to consider when hiring someone to prepare your return, the IRS says to use only preparers who:
• Sign the return as the preparer,
• Enter their IRS Preparer Tax Identification Number (PTIN), and
• Provide you with a copy of the return
For tips about choosing a preparer, red flags, details on preparer qualifications and information on how and when to make a complaint, taxpayers can visit www.irs.gov/chooseataxpro. IRS.gov also has general information on reporting tax fraud. More specifically, you report abusive tax preparers to the IRS on Form 14157, Complaint: Tax Return Preparer. Download Form 14157 and fill it out or order by mail at 800-TAX FORM (800-829-3676). The form includes a return address.