Identity Theft Tops IRS Dirty Dozen Tax Scams for 2013

On March 26, 2013, The IRS released their “Dirty Dozen Tax Scams for 2013”, and Identity Theft is at the top of their list.  Our contact at the IRS today stated that they had over 1.5 million identity thefts in 2012!

Identity theft occurs when someone uses your personal information such as your name, Social Security number (SSN) or other identifying information, without your permission, to commit fraud or other crimes. In many cases, an identity thief uses a legitimate taxpayer’s identity to fraudulently file a tax return and claim a refund.  In fact, three of our clients have been victims of Identity Theft this tax filing season already.

The IRS has a special section on IRS.gov dedicated to identity theft issues, including YouTube videos, tips for taxpayers and an assistance guide. For victims, the information includes how to contact the IRS Identity Protection Specialized Unit. For other taxpayers, there are tips on how taxpayers can protect themselves against identity theft.

Taxpayers who believe they are at risk of identity theft due to lost or stolen personal information, purse, wallet, questionable credit card activity or credit report, should contact the IRS immediately so the agency can take action to secure their tax account.  Taxpayers can call the IRS Identity Protection Specialized Unit at 800-908-4490.  More information can be found on the IRS special identity protection page.

Also note, that “Return Preparer Fraud” is #3 on the list – it is important to choose carefully when hiring an individual or firm to prepare your returns.  Use only preparers who sign the returns they prepare and enter their IRS Preparer Tax Identification Numbers!  According to the IRS, about 40% of taxpayers will not use professional tax preparers!

The complete list of IRS  “Dirty Dozen Tax Scams for 2013” include:

1. Identity Theft
2. Phishing – unsolicited email or fake websites.
3. Return Preparer Fraud – some unscrupulous preparers prey on unsuspecting taxpayers and route their refunds into their personal accounts and possibly identity theft as well.
4. Hiding Income Offshore – taxpayers evade taxes by sending their money to offshore banks, brokerage accounts.
5. “Free Money” from the IRS & Tax Scams Involving Social Security – flyers and advertisements for free money from the IRS suggesting that the taxpayer can file a tax return with little or no documentation have been appearing around the country.
6. Impersonation of Charitable Organizations – people asking for money impersonating charities.
7. False/Inflated Income and Expenses – Including income that was never earned or fraudulent expenses in order to maximize refundable credits is another popular scam.
8. False Form 1099 Refund Claims – In some cases, individuals have made refund claims based on the bogus theory that the federal government maintains secret accounts for U.S. citizens and that taxpayers can gain access to the accounts by issuing 1099-OID forms to the IRS. In this ongoing scam, the perpetrator files a fake information return, such as a Form 1099 Original Issue Discount (OID), to justify a false refund claim on a corresponding tax return.
9. Frivolous Arguments – promoters of frivolous schemes encourage taxpayers to make unreasonable and outlandish claims to avoid paying the taxes they owe.
10. Falsely Claiming Zero Wages – Filing a phony information return is an illegal way to lower the amount of taxes an individual owes. Typically, a Form 4852 (Substitute Form W-2) or a “corrected” Form 1099 is used as a way to improperly reduce taxable income to zero. The taxpayer may also submit a statement rebutting wages and taxes reported by a payer to the IRS.
11. Disguised Corporate Ownership – third parties are improperly used to request employer identification numbers and form corporations that obscure the true ownership of the business.
12. Misuse of Trusts – Unscrupulous promoters urge taxpayers to transfer assets into trusts by telling them that trusts will give them tax benefits, but the trusts are actually used to avoid income tax liability and to hid assets from creditors.