You may be surprised to see a column about tax scams at this time of year. We certainly hear about them more often at the Better Business Bureau in the months leading up to April 15.
The Internal Revenue Service, however, has issued an alert saying that it has seen an increase in tax-return-related scams recently, especially in the Memphis area. Many of the scams are directed at taxpayers who normally don't even have to file a return. The elderly and recipients of Social Security and other benefits are prime targets of the crooks. Some victims are led to believe they need to file a return to receive a tax credit, refund or rebate for which they aren't entitled.
The IRS issues an annual list of the "Dirty Dozen Tax Scams." Some involve people who knowingly commit fraud, including hiding income offshore, making frivolous arguments about why they're exempt from paying taxes, claiming exemptions and deductions they aren't entitled to, and misusing trusts to hide assets or reduce or avoid taxes.
Some people who end up committing the kinds of fraud cited above may not do so knowingly. They may be a victim of another scam on the IRS' Dirty Dozen list -- dishonest tax-return preparers. Federal courts and the Department of Justice have landed on hundreds of shady preparers. The IRS is implementing measures to improve competency, reliability and accountability in the industry.
At the BBB, we're most concerned about the innocent victims of tax scams. The most common are phishing scams in which the crooks impersonate the IRS to trick people, usually via e-mail, into revealing personal and confidential information that the crooks use to commit identity theft. In addition to the IRS, the good name of banks and even the BBB have been used in phishing scams. The crooks attempt to create a sense of urgency with their message.
In its recent alert, the IRS also advised local taxpayers to be wary of the following scams:
Fictitious claims for refunds or rebates based on excess or withheld Social Security benefits.
Claims that Treasury Form 1080 can be used to transfer funds from the Social Security Administration to the IRS enabling a payout from the IRS.
Unfamiliar for-profit tax services teaming with local churches.
Homemade fliers and brochures implying that credits or refunds are available without proof of eligibility.
Offers of free money with no documentation required.
Promises of refunds for "Low Income -- No Documents Tax Returns."
Claims for the expired Economic Recovery Credit Program or for the Recovery Rebate Credit.
Advice on claiming the Earned Income Tax Credit based on exaggerated reports of self-employment income.
E-mail scams are often sophisticated and hard to detect. Red flags include requests for detailed personal and financial information, including information the IRS should already have, such as your Social Security number; threats of consequences for not responding to the notification; and incorrect grammar or odd phrasing.
Remember, if the IRS needs information, it will generally send a letter. Don't respond to unsolicited e-mails or other communications asking for confidential information and don't click on attachments or links that may cause malware to be downloaded to your computer.
Anyone with questions about a tax credit or program should visit IRS.gov, call the IRS toll-free number at (800) 829-1040 or visit a local IRS Taxpayer Assistance Center.
Randy Hutchinson is president and CEO of the Better Business Bureau of the Mid-South. Contact him at email@example.com.
Reprinted with permission from The Commercial Appeal.