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IRS’s 2017 “Dirty Dozen”

Scams Include Tax-Related ID Theft, Tax Shelters

Each year, the IRS releases their list of the “Dirty Dozen” scams to inform taxpayers about criminals who hope to capitalize on a busy, stressful time of year for tax professionals and their clients. The “Dirty Dozen” is made up of criminal activities designed to separate victims from their private information and money and questionable tax reporting strategies.

Ranging from tax-related identity theft to utilizing illegal tax shelters, this year’s “Dirty Dozen” informs taxpayers how they can avoid common criminal ploys and, inadvertently or otherwise, falling afoul of the law:


One of the most commonly reported scams, tax-related phishing emails and websites are criminal communications designed to look like actual correspondence from the IRS or another trusted entity. Phishing scams try to get victims to divulge sensitive information, whether by clicking a link potentially containing malware or simply requesting the information.

Remember: the IRS will never use digital media when first contacting a taxpayer.

Phone Scams

In many phone scams, criminals impersonate IRS agents to try to get taxpayers to provide sensitive information or, even more directly, money. To get victims to turn over credit card numbers, the scammers will threaten legal action, like “arrest [or] deportation and license revocation.”

Identity Theft

Criminals perpetrating tax-related identity theft use a taxpayer’s Social Security Number to fraudulently file a tax return to illegally receive a refund. This criminal enterprise sees billions of dollars siphoned from the United States Treasury each year, and while collaboration between federal, state, and tax-industry officials has helped reduce the number of successful incidents, it still remains a top concern.

Return Preparer Fraud

Some unscrupulous tax preparers gather sensitive taxpayer information to commit identity theft-related crimes. The IRS recommends seeing if your chosen preparer is included in the IRS tax return preparer directory: AFSP participants, attorneys, CPAs, and EAs are all listed.

Fake Charities

Some scam artists set up seemingly legitimate websites – often mimicking the names of well-known charities – to attract unsuspecting donors. Luckily, the IRS’s Exempt Organizations (EO) Select Check tool can help taxpayers verify the authenticity of a charitable organization. Performing some due diligence on the front end can help taxpayers avoid sending hard-earned money to criminals.

Inflated Refund Claims

If a tax preparer promises a large refund before ever looking at your financial information, it should send up a big, red flag. During filing season, fraudsters pose as tax professionals to try and steal sensitive information from taxpayers.

Excessive Claims for Business Credits

Two commonly abused business credits are the fuel tax credit and the research credit. Make sure business claims are substantiated to avoid a penalty; the fuel tax credit, for example, can carry a $5,000 penalty.

Falsely Padding Deductions on Returns

We all know that honest mistakes happen, but there are also a number of taxpayers each year who knowingly claim credits they are not entitled to and pad their business expenses. The vast majority of taxpayers ethically file each year, but perhaps knowing that a “frivolous tax return” can result in a $5,000 penalty or that some actions can result in being criminally prosecuted could be a better deterrent.

Falsifying Income to Claim Credits

Just as erroneously claiming tax credits or padding those business expenses can get you into hot water, falsely reporting income to claim credits, like the EITC, can result in owing back taxes, interest, and penalties.

Abusive Tax Shelters

Using complex tax structures to avoid paying the IRS is another infamous member of the “Dirty Dozen” that can result in owing a penalty payment.

Frivolous Tax Arguments

Remember when your eccentric friend said, “We don’t even have to pay federal income tax. The Sixteenth Amendment wasn’t properly ratified and Ohio wasn’t a state at the time it was ratified?” Well, that’s a two-for-one example of a frivolous tax argument, and it could mean a $5,000 penalty if you decide making that type of claim to the IRS makes for a fun Thursday evening.

Offshore Tax Avoidance

This is one of the more famous members of the “Dirty Dozen,” and you’ve probably read several news articles highlighting how a trusts or corporation has been involved in this type of tax evasion. It can result in hefty penalties and, possibly, criminal prosecution. The short version: don’t do it.

Source: Internal Revenue Service

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