Top Tax Scams for 2009

Introduction

This spring, IRS published its list of tax scams for 2009. Many of the scams are familiar, such as frivolous tax protester arguments, bogus trust arrangements, sham companies, and crooked tax preparers; however, several newer cons involve the use of bogus information forms. Here are the most notable schemes used by tax cheats.

Phishing

Internet-based scam artists use phishing to trick unsuspecting victims into revealing personal or financial information.

This particular phishing scam does not involve taxpayers cheating on their taxes; instead, criminals are impersonating IRS and sending emails to steal financial information from taxpayers.
Note: IRS never uses email to communicate with taxpayers.

Hiding Income Offshore

High on IRS hit list are tax schemes involving off-shore companies and foreign bank accounts.

In addition, IRS is focused on foreign banks which facilitate tax fraud by providing debit cards, credit cards, wire transfers, electronic funds transfer and payment systems, offshore business merchant accounts and private banking relationships.

To counter these ploys, IRS is pushing voluntary disclosure by taxpayers of their foreign accounts before they get caught.

Phony Forms

Tax-scam artists create fake information returns to claim bogus withholding credits used to produce false claims for tax refunds. Form 843 (Claim for Abatement) is being used to eliminate taxes owed by falsely claiming there was an error in calculating the basis in property sold or in the value of property received for services rendered.

Fraudsters are drafting sham information forms, such as Form 4852 (Substitute Form W-2) or a “corrected” Form 1099 to report zero compensation, and then filing phony returns based on the bogus information forms.

Charitable Deductions

Charitable abuses include:
(i) efforts by donors to retain control over donated property;
(ii) false overvaluations for donations of real estate easements and stock of non-public companies; and
(iii) side deals involving the repurchase of donated property at a fraction of the dollar amount claimed as a charitable donation.

Conclusion:

Using the internet, a foreign bank account may be opened or an off-shore company may be created with a couple of button clicks. There is little doubt that Facebook, Twitter and other Web 2.0 social networks and communications will become fertile grounds for a new generation of tax-scam artists. To combat tax fraud, IRS constantly reminds the public that whistleblowers who provide allegations of fraud by filing Form 211 may be eligible for a reward. Sometimes, the reward can be quite substantial.

Print Friendly