The IRS puts out constant reminders concerning potential tax scams that could prove costly to Michigan taxpayers. Taxpayers may lose out on refunds. They could also face civil and criminal penalties for false reporting or filing frivolous returns.
The agency recently put out what it calls its “Dirty Dozen” list. These scams range from obtaining private information through identity theft, and ones involving enticing taxpayers to claim improper deductions on tax returns.
What’s on the list:
- Filing of frivolous returns. By following proposals to file frivolous returns, taxpayers may face a $5,000 penalty.
- Purchase of tax shelters. Scammers often invite taxpayers to purchase tax shelters to reduce taxes owed. Unfortunately, such tax shelters often are not allowable for such a purpose.
- Contributing money to fake charities. Not every charity is a legitimate tax-deductible organization. The IRS has a number of tools allowing taxpayers to discover whether a charity is legitimate.
- Promise of larger tax refunds. It is important to have preparers who are honest. You should beware of taxpayers whose fee structure is based upon the amount of refund you receive. It is always a mistake to falsify income or deductions on any return to qualify for deductions or credits. This could result in civil and criminal penalties.
- Identify theft involving phishing or phone scams. While the IRS will pursue any one it suspects of identity theft, they may not have enough information at their disposal to discover the instigators. Taxpayers may be on the hook for this identity theft. And once private information is in the wrong hands, it is impossible to know who will use it next.
- Hiding of offshore income. The penalties are severe for nondisclosure of offshore assets. It is a good idea to seek information regarding one’s legal options if the possibility that information regarding foreign accounts is undisclosed.
How to deal with tax scams?
Without a sound defense concerning misinformation or improper concerns, you as the taxpayer may ultimately be liable. This means you may face tax levies and liens. It’s wise to speak to an experienced tax attorney to discuss your matter in detail if anything irregular regarding your tax returns occurs.