Dirty Dozen Tax Scams for 2010

As tax season progresses, tax scams are in full throttle. You have to be aware and watch out for these scams and protect yourself. The best defense you have is be informed and prepared. Below we’ll review the IRS’ Dirty Dozen. Take heed of these tax scams!

Tax Preparer Fraud: This scam starts with unethical tax return preparers and affects any clients that they have served. Make sure you go over your tax return and make sure you understand the general calculations. If you don’t, ask the tax preparer to walk you through it. The IRS is fighting back by requiring a preparer tax identification number and continuing education.

Filing False Tax Forms: Like tax preparer fraud, this scam involves unethical filing for credits that they are not qualified to receive. This scam can involve using 1099-OID to give the appearance of a legitimate claim.

Zero Income: Some people are trying to avoid paying their taxes by falsifying their income. Double check your tax return if you think you’re getting a refund that you did not expect.

Frivolous Arguments: This scam involves people being encouraged to avoid paying their taxes by making fraudulent tax claims. This can be an expensive problem as the IRS will charge a $5,000 penalty.

Fuel Tax Credit Fraud: While some occupations can reasonably claim this credit, some tax payers are abusing this provision with†fraudulent†claims. Since this fall under a frivolous tax claim, there is a $5,000 penalty from the IRS.

Hiding Income Offshore: We’ve all seen the campaign the IRS launched to investigate tax evasion by having and not reporting offshore accounts. This tax scam includes foreign trusts, wire transfers, and life insurance plans. Voluntarily disclosing your offshore accounts may help you reduce the chance of criminal prosecution.

Phishing: This is a huge problem and many people can fall victim to it if they are not careful. Just know that the IRS does not ask for financial or personal information via email. The con artists can create very authentic looking emails and website, so please contact the IRS directly by phone at 1-800-829-1040 or search for your local office to get answers.

Retirement Plan Fraud: Some tax preparers have convinced clients to circumvent†retirement†contribution limits by reporting a less than market value transfer of their assets into retirement accounts.

Charitable Deduction Abuse: As the name suggests, this tax scheme has charitable deductions taken in attempt to fraudulently lower tax responsibilities. Some bold con-artists have created and tried to use tax exempt organizations to hide taxable income.

Disguised Corporate Ownership: Instead of creating a business†entity†for†legitimate†purposes, some are abusing this provision as a way to hide income and ownership. In some extreme cases, this has been linked to money laundering schemes. The IRS aggressively works to expose and correct these crimes with state authorities.

Social Security Fraud: Some people have taken the liberty of claiming excessive withholding on their taxes  with their Social Security benefits. The plan is to report no taxable income, but it carries a heavy penalty of $5,000 when caught.

Misuse of Trusts: Be wary of anyone who claims they can guarantee lower tax responsibility by shifting assets into trusts.

Ultimately, you have to be aware and understand the tax credits and deductions you are qualified to take. I hope you have a great tax season!

Elle Martinez

Elle helps families at Couple Money achieve financial freedom by sharing tips for reducing debt, increase income, and building net worth. Learn how to live on one income and have fun with the second.

Comments (14) Leave your comment

  1. my comments have to be reviewed so aslong as someone reads theese and deletes them i know that i am herd

  2. as i feel my voice doesnt matter, and that i am not the only one pissed i am going to begin to spam all forum boards until my moneys recieved

  3. please note i am a single 19 year old boy, without ANY taxes or bills to pay? so what am i waiting for besides the irs to admit they have f*****d up?

  4. i specifically gave you guys 60 bucks only to insure id have the money for my big trip, not to look at a debit card with 0 dollars on it, your supposed to be paying for the quick delivery but now i might miss my whole trip due to the fact i was played by the irs and have to wait close to a month when my trips in a month, how do you guys get away with this? the best part is i wont be getting my 60 bucks refunded

  5. I ABSOLUTELY LOVE TURBO TAX. THE ONLY ONES THAT COULD GET ME NOT JUST THE BIGGEST REFUND, BUT A REFUND AT ALL.!!!

    HERE’S TO YOU T.T. THANK YOU!!!!!

  6. I am having a problem with the woman that prepared my taxes she has cancelled my card changed my address that was on file to hers and had a replacement card sent and provided turbo tax with all the necessary documents to insure them that I am the right person

  7. I pay turbo tax $30 dollars just to tell me i owe the IRS $45 when the government withheld $1000. this is some bullshit. it’s supposed to be a tax “refund” not a tax tax. hopefully jackson hewitt or H & R block can fix this mess

  8. Turbo tax is a SCAM!! When you google “Free Edition” Turbo Tax, an option will come up for free filing is linked to Intuit.com. Once you click on this site, it automatically reroutes you to Turbotax.com. You’re under the impression that you are in the free edition web site. This happened to me when I went to file my son’s income tax. He was getting back less than $225.00, but I ended up paying $93.85 just to file for him. He worked part-time in another state, so they charged me for tow state filings. I called for a refund because I had not transmitted the return yet and the Turbotax representative informed me of why I had to pay the $19.99. In actuality, you have been rerouted to the edition where you HAVE to pay $19.99 just to USE the program and then you are charged an additional amount for the number of states you are filing for. Free-edition states that you don’t pay until you actually file. They had charged me before I even got a chance to save my information, let alone transmit it. Then they wanted to tell me that I had transmitted the return, when I knew that I had not. Rip-off city. Be aware!! I’ll go with Taxact next year.

  9. Turbo tax is a bunch of crooks. They charged me, my son and my daughter separately for our “online” tax preparation even though we all live in the same house and used the same computer to file. Then, my daughter chose the “debit card” for her refund and it never arrived. That’s right, two months after the IRS says the refund was sent, the debit card has still not arrive. When we asked for a check they gave us the run around for three days and then finally said they would send a check. I’ll say it again. Bunch of crooks.

  10. Watch out for those email scams! I accidently opended one up last week and my computer went nuts.

  11. I’m having an issue with the mileage section of my Schedule C. I’m trying to determine my allowable depreciation under form 179. Turbo Tax tells me to go to their Tax Help for calculation. I go there and there’s NOTHING to provide the info. Does anyone know how I get this info?

    Mike Shaw

  12. The biggest fraud of all is TurboTax — a shoddy piece of software that will compute your taxes incorrectly. Needless to say, TurboTax will not refund your money. Time for a criminal investigation?

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