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Top 12 IRS tax scheme businesses: 2014 'Dirty Dozen' tax scams

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A Jacksonville, N.C. woman received a call from a woman claiming to be with the IRS Investigations Department. She was calling with bad news: a warrant had been issued for the woman’s arrest for ‘nonpayment of taxes’, according to Stephanie Zimmerman of The ABC News Fixer.

According to Friday’s ABC report, 'Pay Your Taxes Now or Be Arrested': The Dirty Dozen Tax Scams You Want to Avoid, the scammer was very convincing. She frightened the woman into purchasing prepaid debit cards in the amount of $2,000 in order to pay off the back taxes and penalties she supposedly owed.

And, that’s not the end. The scam continues…

The terrified lady made the payment. Yet, within three hours, she received another call from another fake IRS representative. This one claimed that the woman’s payment had been rejected. And, because of this, she now had to send them an additional $3,500, or be arrested immediately.

Of course, the petrified woman sent them that amount, too. Later, it finally dawned her that she had been scammed.

2014 IRS Dirty Dozen Tax Scams

The sad part is, this type of rip-off scheme is far from unusual. It actually made the list of the ‘Dirty Dozen’ Tax Scams for 2014 this month. Here’s the list of the IRS’ top 12 tax-related schemes for 2014:

  1. Identity TheftThis is the #1 IRS scam. And, because of it, consumers need to keep personal information under lock-and-key. Identity thieves steal the names, social security numbers and other data from consumers. Then, they file income tax returns in their names, obtaining a tax refund.
  2. Phone Scams – IRS is not an agency that readily calls consumers about overdue taxes. With these scams, there’s much variety. Sometimes, the callers will inform the consumer of an income tax return they’re owed. However, they need your bank account and routing numbers or your social security number first. Or, they may call with claims that you owe back taxes. If you don’t pay immediately, you could be deported, lose your driver’s license, even be arrested. And, there’s the ‘spoofing’ technology that’s become so popular among phone scammers. This allows them to call you from one now, and have the toll-free IRS number show up on your caller ID. Read more on spoofing.
  3. Phishing – These schemes are the online versions of phone scams. The versions of the scams are the same. However, instead of spoofing, they cyber-thieves use masked emails. These emails appear to be from an official IRS domain. This helps to lure victims into entering financial and personal data on the phony website. Just like with phone calls, IRS does not send text messages or emails asking for personal information.
  4. Fake Claims of ‘Free Money’ – Scammers also know how to play on the greed of consumers. This scam involves claiming victims are entitled to very larger federal tax refunds. The problem with the scheme is that if the IRS catches you involved in these scams, you could face a penalty of $5,000.
  5. Fraudulent Tax Preparers – There are some fraudulent tax preparers who simply want to steal your identity. So, make sure yours enters an IRS Preparer Tax Identification Number (PTIN) on your return, signs it and gives you a copy.
  6. Income Hidden Offshore – The IRS is cracking down on people who attempt to hide their income using offshore and other foreign accounts. So, beware of scammers who offer to help you with this service.
  7. Fake Charities – This reoccurring scheme pops up every time a high-profile natural disaster occurs. The thieves impersonate charity representatives to get monetary donations. They also ask for taxpayer information, because the fake donations are ‘tax-deductible.’
  8. False Reporting – If you report false exemptions, deductions, expenses and income on your income tax return, you’re officially an IRS scammer. When you’re caught, you’ll have to pay back any refund received, along with penalties and interest. And, you can actually be arrested and prosecuted.
  9. Frivolous Reasoning – IRS despises these. So, don’t even try to get out of paying taxes owed with arguments like ‘taxes are voluntary’ or something about ‘due process.’ They will never work.
  10. False ‘Zero Wages’ Claims – This scam involves taxpayers submitted ‘corrected’ Form 1099s or Form 4852s (substitutes for W2s). The goal is to make it look as though they made less than they actually did, to avoid paying owed taxes. If caught, the penalty for this fraud is $5,000.
  11. Abusive Tax Structure – With this tax scheme, foreign and domestic trust arrangements are used to avoid paying taxes. They usually involve IBCs, LLPs, LLCs, offshore debit or credit cards and foreign financial accounts.
  12. Inappropriate Use of Trusts – The IRS frowns upon the practice of transferring assets in large amounts into foreign trusts and private annuity to avoid paying owed income taxes. This is not always an illegal practice. IRS recommends working with a tax professional to ensure it’s done right.
Avoid Identity Theft
Avoid Identity Theft Pixabay

Avoid Identity Theft

Idenity theft tops the Dirty Dozen Tax Scams for 2014 list. It's vitally important that taxpayers understand the dangers of giving people their personal and financial information. Identity thieves can use this info to file tax returns in your name.

IRS Phishing Scam
IRS Phishing Scam Wikimedia

IRS Phishing Scam

With IRS Phishing scams, thieves call consumers, and official toll-free IRS numbers show up on the caller ID. Beware of anyone claiming to be calling from the IRS in need of your personal or financial information.

Tax Evasion is Fraud
Tax Evasion is Fraud Wikipedia

Tax Evasion is Fraud

Tax evasion is the same as tax fraud. It's a punishable crime. Those found guilty can face hefty fines, as well as jail time. Beware of 'officials' offering to help you get out of paying owed income taxes.

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