Common Tax Schemes

Tricks of the Trade 

Income tax returns are soon due to the IRS.  If you’re like most people, you’re hoping for a nice lump sum refund.  However, as you prepare your forms, be aware that others are plotting ways to steal your hard-earned money.  Avoid falling into common tax traps by reading up on some of the ways con artists are targeting their victims. 

The Miami-Dade Consumer Services Department lists some of the common schemes to steer clear of. 

Common Rip-offs 

·         Making Work Pay Refund.  This phishing e-mail, which claims to come from the IRS, references the president and the Making Work Pay provision of the 2009 economic recovery law. It says that there is a refundable credit available to workers, consumers and retirees that can be paid into the recipient’s bank account if the recipient registers their account information with the IRS. The e-mail contains links to register the account and to claim the tax refund.

In reality, most taxpayers receive their Making Work Pay tax credit, which was designed for wage earners, in their paychecks as a result of decreased tax withholding, not as a lump sum distribution from a federal fund. Additionally, consumers and retirees who are not wage earners are not eligible for this tax credit. 

·         Instant Rebate Scams. Some unscrupulous and predatory tax preparers prey upon low-income earners with promises of “fast money” at tax refund time.  Their victims often do not realize that an instant refund is actually a “refund anticipation loan” that could drain away as much as half their refunds in the form of interest rates and fees.  

Consumer Smarts 

·         Taxpayers do not have to complete a special form to obtain a refund. Taxpayer refunds are based on the tax return they submit to the IRS.   

·         The IRS does not initiate taxpayer contact via unsolicited e-mail or ask for personal identifying or financial information via e-mail. If you receive a suspicious e-mail claiming to come from the IRS, take the following steps:

*         Do not open any attachments to the e-mail, in case they contain malicious code that will infect your computer.

*         Do not click on any links, for the same reason. Also, be aware that the links often connect to a phony IRS Web site that appears authentic and then prompts the victim for personal identifiers, bank or credit card account numbers or PINs. The phony Web sites appear legitimate because the appearance and much of the content are directly copied from an actual page on the IRS Web site and then modified by the scammers for their own purposes.

·         Be cautious when choosing a tax preparer.  Filing false income tax returns with inflated personal or business expenses, false deductions, unallowable credits or excessive exemptions could result in penalties.  Regardless of whether the preparer is responsible for manipulating income figures, it is ultimately the taxpayer who is faulted and required to pay additional taxes.  

·         The IRS advises:

*         Avoid tax preparers who claim they can obtain larger refunds than other preparers.

*         Ask about service fees and be wary of preparers who base their fee on a percentage of the   amount of the refund.

*         Use a reputable tax professional who signs your tax return and provides you with a copy for  your records.

*         Consider whether the individual or firm will be around to answer questions about the preparation of your tax return months, or even years, after the return has been filed.

*         Review your return before you sign it and ask questions on entries you don’t understand.

*         Find out the preparer’s credentials. Only attorneys, certified public accountants (CPAs) and enrolled agents can represent taxpayers before the IRS in all matters including audits, collection and appeals. Other return preparers may only represent taxpayers for audits of returns they actually prepared.

*         Find out if the preparer is affiliated with a professional organization that provides its members with continuing education and resources and holds them to a code of ethics.

Contact the IRS at 1-800-829-1040 to determine whether the IRS is trying to contact you.  If you think you have been targeted by a fraudulent tax scheme, forward the suspicious e-mail or URL address to the IRS mailbox phishing@irs.gov, then delete the e-mail from your inbox. 

You can learn the status of your refund by going to the IRS.gov website and clicking on “Where’s my refund?”