April 2, 2018 2:26 am

Dirty Dozen Tax Scams

The IRS has released its annual list of the top 12 tax scams that taxpayers should avoid (IR-2018-66). These tax scams are:

  1. Phishing: Taxpayers should be alert to potential fake emails or websites looking to steal personal information. Keep in mind that the IRS never initiates contact with taxpayers via email about a bill or tax refund.
  2. Phone Scams: Phone calls from criminals impersonating IRS agents remain an ongoing threat to taxpayers. They threaten taxpayers with police arrest, deportation and license revocation, among other things, which is something the IRS will never do.
  3. Identity Theft: Taxpayers should be alert to tactics aimed at stealing their identities, not just during the tax filing season, but all year long. The IRS is making progress in cutting down on the incidents of identity theft, but there’s still ongoing threats.
  4. Return Preparer Fraud: While the vast majority of tax professionals provide honest, high-quality service, there are some unscrupulous return preparers. Don’t work with these dishonest preparers.
  5. Fake Charities: Groups masquerading as charitable organizations solicit donations from unsuspecting contributors, especially following disasters. Be wary of charities with names similar to familiar or nationally-known organizations and check the status of charitable organizations at https://apps.irs.gov/app/eos/.
  6. Inflated Refund Claims: Steer clear of preparers who ask clients to sign a blank return, promise a big refund before looking at taxpayer records, or charge fees based on a percentage of the refund. These are indications that they’re up to no good and taxpayers end up paying the price.
  7. Excessive Claims for Business Credits: Avoid improperly claiming the fuel tax credit, which is a tax benefit usually limited to off-highway business use (e.g., in farming). Taxpayers should also avoid misuse of the research credit.
  8. Falsely Padding Deductions on Returns: Don’t be tempted to falsely inflate deductions or expenses on tax returns to pay less than what’s owed or potentially receive larger refunds. Think twice before overstating charitable contributions and business expenses.
  9. Falsifying Income to Claim Credits: Con artists may convince unsuspecting taxpayers to invent income to erroneously qualify for tax credits, such as the Earned Income Tax Credit. This scam can lead to taxpayers facing large bills to pay back taxes, interest and penalties.
  10. Frivolous Tax Arguments: Frivolous tax arguments, such as unreasonable and outlandish claims about the legality of paying taxes, may be tried as a way to avoid paying tax. But taxpayers can wind up paying a penalty of $5,000 for filing a frivolous tax return.
  11. Abusive Tax Shelters: The IRS is committed to stopping complex tax avoidance schemes and the people who create and sell them. When in doubt, taxpayers should seek an independent opinion regarding complex products they are offered.
  12. Offshore Tax Avoidance: Successful enforcement actions against offshore cheating show it’s a bad bet to hide money and income offshore. People involved in offshore tax avoidance are best served by coming in voluntarily and getting caught up on their tax-filing responsibilities.
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Tax Glossary

Accelerated depreciation

Depreciation methods that allow faster write-offs than straight-line rates in the earlier periods of the useful life of an asset. For example, in the first few years of recovery, MACRS allows a 200% double declining balance write-off, twice the straight-line rate.

More terms