Tax scams will likely continue and possibly even increase. One possible reason there are so many tax scams that exist is because of taxpayer confusion regarding the new tax laws. When a scammer claims a taxpayer is not in compliance with the law and asks for additional information, many taxpayers believe the request is from the IRS.
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.
Sometimes, identity theft is unavoidable. While it is good to be cautious, not every piece of advice advertisers provide is going to prevent identify theft from occurring.
While the IRS has in place a number of tax return protection measures, these methods have not always been so successful in preventing identity fraud from taking place. Those inventing schemes to file false tax returns while using someone else’s identify often stay ahead of the preventive measures used by tax officials.
We previously reported that identity theft resulted in $3.1 billion in fraudulent tax refunds in 2014. However, many believe this figure to be significantly higher. Wrongdoers are using such Social Security numbers to trigger a refund from the IRS or state revenue offices. Those perpetrating the fraud, besides using the Social Security numbers of actual taxpayers, may be also using the Social Security numbers of deceased taxpayers or children.
Federal regulators put the earned income tax credit (EITC) in place to benefit low- and moderate-income individuals. The EITC particularly benefits individuals with children. Families with three or more qualifying children could claim up a maximum of $6,269 as a result of the EITC. And taxpayers without children could also qualify. The EITC differs from other credits in that even individuals who owe no tax may be eligible for a refund.