While anyone can fall for these schemes, elder financial abuse has become a big problem. The National Committee for the Prevention of Elder Abuse provides information to help avoid such abuse and spot such abuse when perpetrated on others such as family, friends, neighbors, and clients. Forms of abuse that will be discussed include the following techniques:
- Confidence crimes (“cons”) are the use of deception to gain victims’ confidence
- Scams are fraudulent or deceptive acts
- Telemarketing scams. Perpetrators call victims and use deception, scare tactics, or exaggerated claims to get them to send money. They may also make charges against victims’ credit cards without authorization
- Fraud is the use of deception, trickery, false pretense, or dishonest acts or statements for financial gain
Internal Revenue Service (IRS) Dirty Dozen Tax Scams 2016
The IRS annually publishes its “Dirty Dozen” list of tax scams. This year, identity theft topped the list, but phone scams and phishing schemes deserve special mention. Taxpayers need to guard against any ploys to steal their personal information, scam them out of money or talk them into engaging in questionable behavior with their taxes. Many of these con games peak during filing season as people prepare their tax returns or hire someone to do so. Let’s review this year’s Dirty Dozen.
Identity Theft: Taxpayers need to watch out for identity theft, especially around tax time. The IRS continues to aggressively pursue the criminals that file fraudulent returns using someone else’s Social Security number. This leaves you in the difficult position of proving you are you, since a return was already filed in your name.
Phone Scams: Phone calls from criminals impersonating IRS agents remain an ongoing threat to taxpayers. The irony that the power of the IRS is used as a scam identified by the IRS is not lost here. The IRS has seen a surge of these phone scams in recent years as scam artists threaten taxpayers with police arrest, deportation and license revocation, among other things. IRS Commissioner John Koskinen says, “We continue to say if you are surprised to be hearing from us, then you’re not hearing from us. There are many variations. The caller may threaten you with arrest or court action to trick you into making a payment.” Koskinen adds, “Some schemes may say you’re entitled to a huge refund. These all add up to trouble. Some simple tips can help protect you.” Here are five things the scammers often do but the IRS will not do. Any one of these five things is a telltale sign of a scam.
The IRS will never:
- Call to demand immediate payment, nor will the agency call about taxes owed without first having mailed you a bill.
- Demand that you pay taxes without giving you the opportunity to question or appeal the amount they say you owe.
- Require you to use a specific payment method for your taxes, such as a prepaid debit card.
- Ask for credit or debit card numbers over the phone.
- Threaten to bring in local police or other law-enforcement groups to have you arrested for not paying.
If you get a phone call from someone claiming to be from the IRS and asking for money, here’s what you should do:
If you don’t owe taxes or have no reason to think that you do:
- Do not give out any information. Hang up immediately.
- Contact TIGTA to report the call at 800-366-4484.
If you know you owe or think you may owe taxes:
- Call the IRS at 800-829-1040. IRS workers can help you.
Phishing: Taxpayers need to be on guard against fake emails or websites looking to steal personal information. The IRS will never send taxpayers an email about a bill or refund out of the blue. Don’t click on one claiming to be from the IRS. These also take the form of messages from your bank, internet service provider, or other organizations that may be familiar to you. The scammers often go to great lengths to make their emails and even websites look realistic. Be wary of strange emails and websites that may be nothing more than scams to steal personal information.
Return Preparer Fraud: Be on the lookout for unscrupulous return preparers. The vast majority of tax professionals provide honest high-quality service. But there are some dishonest preparers who set up shop each filing season to perpetrate refund fraud, identity theft, and other scams that hurt taxpayers. Legitimate tax professionals are a vital part of the U.S. tax system.
Offshore Tax Avoidance: The recent string of successful enforcement actions against offshore tax cheats, by individuals or companies and the financial organizations that help them, shows that it’s a bad bet to hide money and income offshore. Taxpayers are best served by coming in voluntarily and getting caught up on their tax-filing responsibilities. The IRS offers the Offshore Voluntary Disclosure Program (OVDP) to enable people to catch up on their filing and tax obligations.
Inflated Refund Claims: Taxpayers need to be on the lookout for anyone promising inflated refunds. Be wary of individuals who ask taxpayers to sign a blank return, promise a big refund before looking at their records, or charge fees based on a percentage of the refund. Scam artists use flyers, advertisements, phony store fronts, and word of mouth via community groups where trust is high to find victims.
Fake Charities: Be on guard against groups masquerading as charitable organizations to attract donations from unsuspecting contributors. Be wary of charities with names similar to familiar or nationally-known organizations. Contributors should take a few extra minutes to ensure their hard-earned money goes to legitimate and currently eligible charities. IRS.gov has the tools taxpayers need to check out the status of charitable organizations. Charity names and reputations can also be vetted at Charity Navigator, Charity Watch, and GuideStar. You can also contact the agency in your state that regulates charities. These fakes often arise following disasters where people are desirous to help out, which helps the fakes make sense of being “new” and not having a background or reputation.
Falsely Padding Deductions on Returns: Taxpayers should avoid the temptation of falsely inflating deductions or expenses on their returns to under pay what they owe or possibly receive larger refunds. Think twice before overstating deductions such as charitable contributions and business expenses or improperly claiming such credits as the Earned Income Tax Credit or Child Tax Credit.
Excessive Claims for Business Credits: Avoid improperly claiming the fuel tax credit, a tax benefit generally not available to most taxpayers. The credit is generally limited to off-highway business use, including use in farming. Taxpayers should also avoid misuse of the research credit. Improper claims generally involve failures to participate in or substantiate qualified research activities and/or satisfy the requirements related to qualified research expenses.
Falsifying Income to Claim Credits: Don’t invent income to erroneously qualify for tax credits, such as the Earned Income Tax Credit. Taxpayers are sometimes talked into doing this by scam artists. Taxpayers are best served by filing the most accurate return possible because they are legally responsible for what is on their return.
This scam can lead to taxpayers facing big bills to pay back taxes, interest, and penalties. In some cases, they may even face criminal prosecution.
Abusive Tax Shelters: Don’t use abusive tax structures to avoid paying taxes. The IRS is committed to stopping complex tax avoidance schemes and the people who create and sell them. The vast majority of taxpayers pay their fair share, and everyone should be on the lookout for people peddling tax shelters that sound too good to be true. When in doubt, taxpayers should seek an independent opinion regarding complex products they are offered.
Frivolous Tax Arguments: Don’t use frivolous tax arguments in an effort to avoid paying tax. Promoters of frivolous schemes encourage taxpayers to make unreasonable and outlandish claims, even though they are wrong and have been repeatedly thrown out of court. While taxpayers have the right to contest their tax liabilities in court, no one has the right to disobey the law or disregard their responsibility to pay taxes. The penalty for filing a frivolous tax return is $5,000.
Summary: Where there is money, fakes, scammers, con artists, and disreputable people will be there to see how they can profit. Don’t be one of their victims, nor let your family, friends, or neighbors be victimized. Use trained professionals and carefully vet the professionals you use.
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This publication contains general information only, and neither National Advisors Trust Company, FSB, nor Cannon Financial Institute is, by this publication, rendering accounting, financial, investment, legal, tax or other professional advice or services.