- Days left
Don't say they didn't warn you. The IRS just issued its annual "Dirty Dozen" Tax Scams report, a list of frequently-used frauds that cheat honest taxpayers out of hundreds or even thousands of dollars each year.

While there may be a long history of tax cheats, there's also a solid record of con artists that prey on those who are trying to do right by Uncle Sam. Among some of this year's chart toppers are hiding offshore accounts and tax preparer fraud.

"Taxpayers should be aware of anyone peddling scams that seem too good to be true," said IRS Commissioner Doug Shulman in the announcement. The agency warned that taxpayers who fall prey to such scams will be on the hook for unpaid taxes, plus interest and fees, and could even face jail time.

So without any further adieu, here's the "Dirty Dozen" tax scams to avoid when filing your taxes this year.

1. Return preparer fraud.
You may think that hiring a tax preparer is the best way to ensure that you're doing your taxes the right way, but unfortunately that's not always the case. Fraudulent tax preparers may do anything from helping themselves to a portion of your refund, to charging way too much to do your taxes or rigging it so that you get a refund that you don't really deserve (and thus encouraging you to use their services again). The IRS is implementing a number of changes that it hopes will help prevent such frauds in upcoming years. The agency wants to put a system in place that requires all paid tax return preparers (with some exceptions like CPAs and attorneys who have already been vetted) to register with the IRS, obtain a preparer tax identification number, take competency tests and enroll in courses.

2. Hiding income offshore. This shouldn't come as a big surprise, but the IRS doesn't want you to hide your money in an offshore account in order to avoid paying taxes. The agency has been cracking down on offshore accounts (after all, it really wants its money). On its Web site, the IRS says it "continues to urge taxpayers with offshore accounts or entities to voluntarily come forward and resolve their tax matters." Yeah, good luck with that.

3. Phishing. That's the lingo for con artists who phish, or "fish," for unsuspecting victims and try to get them to reveal private information that they can use to steal their identity and their money. These scams "can take the form of e-mails, tweets or phony web sites. Scammers may also use phones and faxes to reach their victims," the IRS says. In such cases, the con tells the victim that they are entitled to a refund from the IRS, but to get the money, you have to prove who you are by revealing your Social Security number or other private information. Suddenly, the victim learns that their bank account has been cleaned out, or that their credit card has been run up into the thousands of dollars. If you get any weird, suspicious emails that look like they're from the IRS but you suspect aren't, send them onto phishing@irs.gov.

4. Filing false or misleading forms. Some people file false or misleading returns, hoping to claim refunds that they aren't supposed to get. "Phony information returns, such as a form 1099-Original Issue Discount (OID), claiming false withholding credits usually are used to legitimize erroneous refund claims. One version of the scheme is based on a false theory that the federal government maintains secret accounts for its citizens, and that taxpayers can gain access to funds in those accounts by issuing 1099-OID forms to their creditors, including the IRS," the agency says.

5. Nontaxable Social Security benefits with exaggerated withholding credit. Inflating your withholding when reporting nontaxable Social Security benefits can result in no income being reported to the IRS on your tax return. This is one mistake that can cost you. Get caught reporting the wrong income and/or withholding amount and you may get slapped with a $5,000 fine.

6. Abuse of charitable organizations and deductions. There are plenty of ways charitable contributions are mishandled on tax forms (come on, that flannel shirt you donated to the Salvation Army is not worth $1,000), but the IRS is onto a scam where several organizations are claiming donations of the same non-cash item, the value of which is typically inflated. In some of these scams, the organization agrees to sell the item back to the donor later at a price that's favorable to the donor.

7. Frivolous arguments. The IRS gets it. Some people don't think they should pay taxes and they feel they're legally entitled to opt out. Well, if you think you have a legal case for not paying your taxes, you may want to check out the IRS's page on "Frivolous Tax Arguments in General." It's a list of arguments people have used in hopes of getting out of paying their taxes. Don't waste your time trying any of these: None of them will wash with the IRS. So if you want to argue that the only employees subject to federal income tax are employees of the federal government -- well, guess what? They've heard that one before.

8. Abusive retirement plans. Conducting a transaction that allows you to either a.) circumvent the contribution limits on your Roth IRA or b.) improperly report early distributions could end up costing you your nest egg. "Taxpayers should be wary of advisers who encourage them to shift appreciated assets at less than fair market value into IRAs or companies owned by their IRAs to circumvent annual contribution limits," the IRS warns.

9. Disguised corporate ownership. If you own a business, but you're trying to hide the fact that you own it (say, by using someone else to request an employer identification number) in order to avoid paying your fair share of taxes for the company -- well, the IRS is looking for you.

10. Zero wages. Some taxpayers go out of their way to make it look like they earned little or nothing during the tax year. Often these fraudsters will use a Form 4852 (Substitute Form W-2) or a "corrected" Form 1099 to make it look like their taxable income is zero.

11. Misuse of trusts. If someone offers to transfer your assets into a trust (like a private annuity or foreign trust) and promises that a reduction in income tax and estate or gift taxes will follow, think twice. These trusts are often used to hide income and assets from the IRS -- and they often don't deliver on their tax perks, either. The IRS advises that taxpayers should "seek the advice of a trusted professional before entering into a trust arrangement."

12. Fuel tax credit scams. I can envision plenty of people accidentally scamming the IRS simply because they hope they're eligible for a fuel tax credit and claim it. But chances are, you aren't eligible. (This is where tax preparation software or a tax preparer really can steer you away from such boneheaded moves.) The IRS says that some taxpayers, like farmers who use fuel for off-highway business purposes, are often eligible for the fuel tax credit, but a lot of people "are claiming the tax credit for nontaxable uses of fuel when their occupation or income level makes the claim unreasonable." Those who improperly claim that credit may end up with a $5,000 fine -- that kind of money could buy a lot of gas.

Geoff Williams is a frequent contributor to WalletPop. He is also the co-author of the new book Living Well with Bad Credit.

Increase your money and finance knowledge from home

Economics 101

Intro to economics. But fun.

View Course »

Getting out of debt

Everyone hates debt. Get out of it.

View Course »

TurboTax Articles

Video: Tax Guidelines About Gifting

Note: Some of the content of this video applies only to taxes prepared prior to 2012. It is included here for reference only. Find out the tax guidelines about gifting with help from TurboTax in this video on tax tips.

Video: What are Income Tax Rates?

Note: The content of this video applies only to taxes prepared for 2010. It is included here for reference only. Income tax rates change depending on both the amount of money you make and how you made it. Find out about income tax rates with help from TurboTax in this video on tax tips.

Video: How To Reduce Errors on Your Tax Return

Did you know that errors on your tax return can affect the amount of your tax bill and the amount of time it takes to get a refund? Fortunately, TurboTax helps you avoid errors AND be sure you're getting all the tax deductions and credits you deserve.

Does Your Company Need to File Form 1095-B?

A company is responsible for filing IRS Form 1095-B only if two conditions apply: It offers health coverage to its employees, and it is "self-insured." This means that the company itself pays its employees' medical bills, rather than an insurance company. A company that doesn't meet both conditions won't have to deal with Form 1095-B. Its employees might still receive a 1095-B, but from their insurer, not the employer.

Video: Who Qualifies for an Affordable Care Act Exemption (Obamacare)?

The Affordable Care Act requires all Americans to have health insurance or pay a tax penalty. But, who qualifies for an Affordable Care Act exemption? Find out more about who qualifies for an exemption from the Affordable Care Act tax penalty, how to claim an exemption on your tax return and how the Affordable Care Act may affect your taxes with this video from TurboTax.

Add a Comment

*0 / 3000 Character Maximum