As evidenced by the list of the "Dirty Dozen" tax scams recently released by the IRS, the tax swindlers are getting smarter every year. Here is a summary of the 12 notorious scams to watch out for in 2016.
1. Identity theft: A crook can steal your Social Security number and use it to file a fraudulent tax return or for some other nefarious purpose. Identity theft remains the top concern of individuals.
2. Telephone scams: You might receive a telephone call by someone impersonating an IRS agent. They could threaten you with arrest, deportation, license revocation or some other action.
3. Phishing: Beware of someone posing as a person from an organization or company you trust. They may contact you via e-mail purporting to be a bank, credit card company, tax software provider or government agency.
4. Tax-preparer fraud: Of course, the vast majority of tax professionals provide honest, high-quality service. But there are some bad apples in the barrel that perpetrate tax-refund scams, identity theft and other schemes.
5. Offshore accounts: Individuals have tried to evade U.S. taxes by hiding income in offshore banks, brokerage accounts or nominee entities, and then using debit cards, credit cards or wire transfers to access the funds.
6. Inflated refund claims: Don’t be lured in by a tax professional promising you a tax refund that is too good to be true. The scam may spread by flyers, advertisements, phony storefronts and word of mouth—even through community groups or churches.
7. Fake charities: Following a disaster, scammers representing bogus charities may contact you to solicit money or financial information. They even go after the disaster victims.
8. Falsely padding deductions: The IRS warns taxpayers to avoid the temptation to falsely inflate deductions or expenses on their tax returns. False numbers may reduce tax liability or increase a refund.
9. Business credits: Con artists may promote scams involving business credits, such as the fuel credit or research credit, where such credits are not available.
10. Falsified income: Some people falsely increase the income they report to the IRS to maximize refundable credits such as the earned income tax credit and child tax credit.
11. Abusive tax shelters: Abusive tax schemes have evolved from simple structuring of abusive domestic and foreign trust arrangements into sophisticated strategies that often benefit from financial secrecy laws in foreign jurisdictions.
12. Frivolous tax arguments: The IRS continues to come across individuals using frivolous arguments that taxes should not have to be paid, including objecting to owing tax on moral, religious or ethical grounds.
Have you been targeted by con artists? Don’t be overly proud or foolish. If you have any questions about the legitimacy of an arrangement or an action, contact your professional tax adviser for assistance.