IRS Warns Taxpayers of Common Tax Scam Schemes
3/10/2003

Source: The Columbian --

--Promises to reduce personal taxes or secure fat returns flourish as April 15 nears. The IRS is warning consumers to be wary of 12 common schemes. IRS officials said offshore transactions and identity theft have risen to the top of the list.

"Year after year con artists try pulling a fast one on honest taxpayers with different types of miracle tax solutions," said Bob Wenzel, IRS acting commissioner. "There is no secret way to get out of paying taxes."

Shelly Schutter, a supervisor for the Washington attorney general's consumer resource center in Vancouver, said her office receives few complaints, but when lodged they often deal with tax preparers. She did caution consumers that tax refund loans, which are popular for the instant money offered, often carry high interest rates.

The IRS urges people to avoid the following ploys:

--Offshore transactions: These accounts are used to avoid paying U.S. income tax. The IRS is providing amnesty through April 15 for violators who want to avoid civil fraud and information return penalties. For information, call 216-516-3537.

--Identity theft: The IRS is aware of two recent scams. In one, a tax preparer is accused of using a client's personal information to commit identity theft. The second case involved bank customers receiving fictitious bank statements and IRS forms in an attempt to collect personal and bank data.

--Phony tax payment checks: This scheme involves someone selling fake checks to pay tax, liability, mortgage and other debts.

--Slave tax refund: Thousands of African Americans have been misled to believe that they are eligible for tax refunds or credits related to reparations for slavery. Promoters offer to prepare the paperwork for a fee. This was the top scam last year.

--No taxes withheld from wages: This scheme targets employers and urges businesses to not withhold federal income tax or employment taxes from employee wages. The advice is based on an incorrect interpretation of the tax law and has been refuted in court.

--Improper home-based business: Promoters urge a person to set up a bogus home-based business and then write off all or most of the expenses for setting up the business. Tax law is clear that a business purpose and profit motive are needed to claim legitimate business expenses.

--Pay the tax, get a prize: A caller is told he or she has won a prize but needs to pay the taxes. Tax law states any payment on prizes is paid to the IRS, not the party sponsoring the contest.

--Frivolous arguments: Several groups argue erroneously you don't need to pay taxes and for a fee will explain how to avoid paying taxes.

--Social Security tax scheme: There are offers floating around that offer Social Security tax refunds for a paperwork fee.

--"I can get you a big refund--for a fee": The two lessons from this claim are anyone promising big returns could be misleading, and never sign a tax return without ensuring it's honest and correct.

--Sharing or borrowing of dependents: Some preparers share one client's qualifying child dependents with another client so that both receive the maximum earned income tax credit.

--IRS agents collecting payments door to door: IRS agents, field auditors and collection officers carry picture identification and normally call before visiting. Call the police if you think the person at your door is an impostor.