IRS Releases its Annual “Dirty Dozen Tax Scams” List

The Internal Revenue Service completed yesterday the release of its annual “Dirty Dozen Tax Scams.”  Some are perennial chart toppers.  I list the Dirty Dozen in order of the IRS ranking.

  1. #1– Identity theft.  I agree.  Check out the “ Security. Together.”  on the irs.gov website for tips on protecting  your information.
  2. #2– Phone scams. I have personally received several of these calls and so have many of my clients.  Ignore these calls.  The IRS does not call and threaten people.  Also, when the caller refers in the litany of threats to set loose upon you “Her Majesty’s Magistrates,” take that as a strong hint that it’s a scam.
  3. #3– Phishing.These are unsolicited emails seeking financial or personal information.  The crooks can claim to be the IRS, a bank, a charity, your kids, or anybody else.  They just want to get the camel’s nose under the tent.   Don’t respond.  Delete!
  4. #4– Return preparer fraud. The IRS provides some good guidelines on what to look for.   CPAs, attorneys, enrolled agents and – especially – HM&M are good bets.
  5. #5– Hiding money or income offshore. The IRS is pretty good at finding offshore funds one thinks are hidden.  The Foreign Account Tax Compliance Act, which went into full effect in 2015, made the IRS even better at tracking down offshore money and other assets.
  6. #6– Inflated refund claims. This item frequently involves taxpayers claiming tax credits to which they are not entitled.  See, also, items 8, 9, and 10 below.
  7. #7– Fake charities. This item is more about scamming you than scamming the government.  Particularly when large-scale natural disasters strike, there sprout like weeds fake charities with names quite similar to legitimate charities and fake websites that claim to be that of real charities.
  8. #8– Falsely padding deductions. This is a new one to the Dirty Dozen list.  It is not a new trick, of course. The IRS must have done some analysis of its audit results to elevate it to the list.
  9. #9– Excessive claims for business credits. This is like item 6 above.  An overstated research tax credit is a frequent scamming tool.
  10. #10– Falsifying income to claim tax credits.   This a bit counter-intuitive.  It involves overstating earned income in order to qualify for the refundable Earned Income Tax Credit.
  11. #11– Abusive tax shelters.  This is always on the list.  I think it is the first time that the IRS has mentioned captive insurance companies.  Captive insurance companies can be a great and legitimate tax reduction tool, but remember:  “Pigs get fat and hogs get slaughtered.”
  12. #12– Frivolous tax arguments. Another perennial.  The IRS provides on its website a list of 44 such arguments.  It’s hard for me to argue with the IRS about these not-so-brainy arguments.  They range from “only foreign-source income is taxable” to “the Internal Revenue Service is not an agency of the United States.”  Huh?

VKM

Latest News

Reminder: 3rd Quarter Estimated Tax Payments are Due Wednesday (September 15)

The due date for making 3rd quarter estimated tax payments for individuals and trusts is Wednesday, September 15th. ...

The Work Number – Employment Database Sharing Program (Action May Be Needed By July 31)

A new program for QuickBooks or Intuit Online Payroll users is going live on August 1, 2021. The ...

U.S. Supreme Court Building

U.S. Supreme Court Rules Against Latest ACA Challenge

In a highly anticipated decision, the U.S. Supreme Court on June 17 ruled by a 7-2 vote that ...

HM&M Updates

Our Frisco Office Has Moved

We have moved to our permanent location in Frisco located in Hall Park which is conveniently located at ...

Anat Shares Tax Insights at Park Cities Rotary Club Meeting

On Friday, July 9th, Anat Borodyansky spoke to Park Cities Rotary. She shared recent tax insights and important ...

2021 Promotions at HM&M

We are pleased to announce that effective July 15, 2021, Alyson Brands, Diana Cetares and Sirena Plitt have ...