At Attorneys Corporation Service, Inc. our goal is to provide our clients — attorneys, CPAs, and other licensed professionals — with expedited services and assistance for their business filing and incorporation needs. As many tax preparers know, an Employer Identification Number is essential during tax season. In honor of this busy time, we brought you a list of the IRS’ top tax scams (part 1 of 3). Great info to share with your clients!
Illegal tax scams can lead to significant penalties and possible criminal prosecution. The IRS Criminal Investigation Division works closely with the Department of Justice to shut down scams and prosecute the criminals behind them.
The following is Part 1 of our 3-Part series on the Dirty Dozen tax scams
1. Identity Theft
In response to the increase in identity theft, the IRS has embarked on a comprehensive strategy focused on preventing, detecting, and resolving identity theft cases as soon as possible. The IRS has stepped up its internal reviews to spot false tax returns before tax refunds are issued as well as working to help victims of the identity theft refund schemes. Identity theft cases are among the most complex ones the IRS handles and the agency is committed to working with taxpayers who have become victims of identity theft.
The IRS has a thorough screening process with measures intended to stop fraudulent tax returns. Even with the IRS’ aggressive approach to tax-related identity theft, the agency is seeing an increase in identity crimes; including more complex schemes. In 2011, the IRS protected more than $1.4 billion of taxpayer funds from getting into the wrong hands due to identity theft.
If you believe your or your client’s personal information has been stolen and used for tax purposes should immediately contact the IRS Identity Protection Specialized Unit. For more information, visit the special identity theft page at www.IRS.gov/identitytheft.
Phishing is a scam typically carried out with the help of unsolicited e-mail or a fake website. Posing as a legitimate site, the goal is to lure in potential victims and prompt them to provide valuable personal and financial information. Armed with this information, a criminal can commit identity theft or financial theft.
If you receive an unsolicited e-mail message that appears to be from either the IRS or an organization closely linked to the IRS, such as the Electronic Federal Tax Payment System (EFTPS), report the message by sending it to firstname.lastname@example.org.
Be aware that the IRS does not initiate contact with taxpayers by e-mail to request personal or financial information. This includes any type of electronic communication, such as text messages and social media channels.
3. Return Preparer Fraud
About 60% of taxpayers will use tax professionals (like you) this year to prepare and file their tax returns. Perhaps you have hired a professional to file your tax returns. While most return preparers provide honest service to their clients, there are also some who prey on unsuspecting taxpayers.
Be on the lookout for questionable return preparers who skim off clients’ refunds, charge inflated fees for return preparation services and attract new clients by promising guaranteed or inflated refunds. As when hiring anyone to handle your money, you should choose carefully when hiring a tax preparer. In 2012, every paid preparer needs to have a Preparer Tax Identification Number (PTIN) and enter it on the returns he or she prepares.
So how do you know if you are dealing with an unscrupulous return preparer? Signs include:
- The preparer does not sign the return or place a Preparer Tax identification Number on it.
- The preparer does not give you a copy of your tax return.
- The preparer promises larger than normal tax refunds.
- The preparer charges a percentage of the refund amount as preparation fee.
- The preparer requires you to split the refund to pay the preparation fee.
- The preparer adds forms to the return you have never filed before.
- The preparer encourages you to place false information on your return, such as false income, expenses and/or credits.
Check back next week for Part 2 of our 3-Part series on 2012’s top tax scams.
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Attorneys Corporation Service, Inc. provides fast, reliable formation services and quality products. For customized Corporate Kits, LLC Kits, Estate Plan Organizers and Corporate Supplies, your premier source is Attorneys Corporation Service. We also have solutions for tough filing assignments. Call us at 800.462.5487 or check us out online at www.AttorneysCorpServices.com.