Thursday, March 1, 2012

IRS issues 2012 tax scams warning. Make sure you don't get ripped-off

The topic of my business news interview with Steve Leader at KXL-101.1 FM radio in Portland this week is tax scams. Many of us are working right now on our 2011 tax returns with the deadline coming up in April. And many of us look for help in getting those taxes done.The IRS is keeping an eye out for tax scams where legitimate taxpayers can get ripped off. "Scam artists," said the IRS "will tempt people in-person, on-line and by e-mail with misleading promises about lost refunds and free money." Here are scams to be most wary of this year:
1. Identity theft: A growing number of identity thieves are using other taxpayer's personal information to file fraudulent tax returns and claim undeserved refunds, the IRS warns. In 2011, the agency stopped more than $1.4 billion in refunds from getting into the wrong hands, and it plans to weed out more identity thieves this year.
If you believe someone stole your personal information for tax purposes, call the IRS Identity Protection Specialized Unit at 800-908-4490 or go to IRS.gov/identitytheft.
2. Phishing: Scammers can steal your personal information from e-mails, phone calls, text messages or social media like your Facebook page. Some fake Web sites are also set up to dupe potential victims into giving out their information. If you see anything suspicious or receive a message from someone claiming to be from the IRS, don't open any attachments or click on links included in the e-mail. Instead, forward the message to the IRS at phishing@irs.gov.
3.Beware of trust transfers. Beware of anyone who tries to convince you to transfer money into a trust in order to reduce your taxable income, deductions for personal expenses and/or estate taxes. The IRS has seen an increase in the number of taxpayers improperly using trusts -- especially private annuity trusts and foreign trusts -- to skip out on tax liabilities.
"While there are legitimate uses of trusts in tax and estate planning, some highly questionable transactions promise big reductions of income subject to tax," said the IRS. " Such trusts rarely deliver the tax benefits promised and are used primarily as a means of avoiding income tax liability and hiding assets from creditors, including the IRS. You could get nailed."
4. Sketchy tax preparers: With about 60 percent of taxpayers expected to use professionals to prepare and submit their taxes this year, be careful about whom you entrust with personal information. There are many preparers out there who will take a portion of a client's refunds, charge more than they should for services and lure taxpayers to their offices by promising unattainable refunds. According to the IRS, federal courts have issued hundreds of injunctions ordering tax professionals engaging in these scams to stop preparing returns, and the Department of Justice has issued many complaints against preparers as well.
The good news: This year, all paid preparers are required to have a Preparer Tax Identification Number (PTIN) so customers can verify that they are legitimate. Be wary if your preparer doesn't sign the return or put their PTIN on it, doesn't give you a copy of your return, promises unusually large refunds, charges a percentage of the refund amount as a fee, adds forms to the return you've never filed before, or encourages you to include false information on your return, the IRS says.

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