Tax Agency Warns Of Increased Scams

It's not just tax season, it's also tax scam season. While filing a federal return and waiting for a refund is at the top of everyone's mind these days, criminals are trying to figure out ways to trick taxpayers into turning over their cash or sensitive financial information.

The Internal Revenue Service (IRS) warns that taxpayers must carefully choose a tax preparer, ensuring that they are not only competent to prepare your return, but also trustworthy. The IRS has noted an increase in tax-return-related scams, frequently involving unsuspecting taxpayers who normally do not have a filing requirement in the first place.

South and Midwest have been targets

These taxpayers are led to believe they should file a return with the IRS for tax credits, refunds or rebates for which they are not really entitled. Many of these recent scams have been targeted in the South and Midwest.

Most paid tax return preparers provide honest and professional service, but there are some who engage in fraud and other illegal activities. Unscrupulous promoters deceive people into paying for advice on how to file false claims. Some promoters may charge unreasonable amounts for preparing legitimate returns that could have been prepared for free by the IRS or IRS sponsored Volunteer Income Tax Assistance partners. In other situations, identity theft is involved.

According to the IRS, taxpayers should be wary of any of the following:

• Fictitious claims for refunds or rebates based on excess or withheld Social Security benefits.
• Claims that Treasury Form 1080 can be used to transfer funds from the Social Security Administration to the IRS enabling a payout from the IRS.
• Unfamiliar for-profit tax services teaming up with local churches.
• Home-made flyers and brochures implying credits or refunds are available without proof of eligibility.
• Offers of free money with no documentation required.
• Promises of refunds for “Low Income – No Documents Tax Returns.”
• Claims for the expired Economic Recovery Credit Program or Recovery Rebate Credit. 
• Advice on claiming the Earned Income Tax Credit based on exaggerated reports of self-employment income.

In some cases non-existent Social Security refunds or rebates have been the bait used by the con artists. In other situations, taxpayers deserve the tax credits they are promised but the preparer uses fictitious or inflated information on the return which results in a fraudulent return.

Don't be tempted by fliers and advertisements for free money from the IRS, suggesting that the taxpayer can file with little or no documentation. These items have been appearing in community churches around the country, starting last year. Promoters appear to be targeting church congregations, exploiting their good intentions and credibility, the IRS says.