How to Avoid Tax Scams and the
Con Men Who Peddle Them
The yearly exercise of gathering that plethora of papers
from the furthermost reaches of the home or office can
be extremely daunting. Keeping up with the ever-changing
list of real and bogus deductions and how they do or
do not apply to you can be equally daunting. Banklady.com
feels your pain! We have, therefore, compiled a few
suggestions to help you avoid the scam artists and their
endless ruse by hiring a trustworthy tax professional
who will actually prepare and file your return legally.
Remember that your tax return is all about you and so
are any mistakes, miscalculations, misinterpretations,
misrepresentations, and the resulting penalties and
additional tax, if any, no matter who does the preparing.
Make sure that you and your tax preparer are on the
same page philosophically. If he or she encourages you
to overstate your business or personal expenses, exemptions
or other deductions, beware!
Unless you have the good fortune of a personal recommendation
from a trusted friend, you will have to take it upon
yourself to determine the qualifications, as well as
the ethics, of any prospective preparer. Treat it like
an employment interview. If the candidate refuses an
in-person meeting, is unable to provide references or
proof that he has taken the appropriate tax preparation
courses, chances are he’s less than legit. Look
for the designations of certified public accountant,
enrolled agent or tax attorney. These professionals
are required to stay current with changes in the tax
laws and they are permitted to represent taxpayers before
the IRS in audits, collection actions and appeals.
Scam artists and con men are rampant at tax time, ready
to swindle unwary victims in all income brackets, claiming
that, for a fee, they can get you more deductions and
a bigger refund. A forthright tax preparer would never
make such claims before reviewing all the facts. If
your tax preparer’s fee is based on a percentage
of your refund, run like the wind! Reputable professionals
charge by the hour or according to the number of forms
completed as part of the return and they make these
policies clear from the beginning.
Identity theft is a term we’ve heard a lot lately
and it rears its ugly head most prominently during tax
season. Never sign a blank form and never sign a draft
form in pencil. Don’t give your Social Security
number to a would-be tax preparer until you have thoroughly
checked him out. Some are looking to gain more from
you than a tax preparation fee.
In other schemes, a caller or an Internet ad will offer
to “un-tax you for $49.95,” claiming that
paying taxes is voluntary. The IRS reports that hundreds
of people have been taken in by this ruse and later
prosecuted for breaking the law. Refund of Social Security
taxes is another hoax with absolutely no factual basis.
The taxpayer agrees to pay an up-front “paperwork”
fee of $100 plus a percentage of the refund. The scammer
then disappears with the victim’s hundred bucks
and his bogus claim is, of course, denied.
Several years ago, the number one scheme on the IRS’
“Dirty Dozen” list was a scam citing a law
that supposedly provided reparation for slavery. Thousands
of hopeful African-Americans paid to have these claims
filed on their behalf, only to learn there is no such
provision in tax law and taxpayers who file these claims
can face up to $500 in penalties if they don’t
withdraw the claim.
Some taxpayers are led to believe that by transferring
assets into trusts or offshore accounts, they can reduce
or eliminate taxes. Not so. Such schemes are certain
to come under the very close scrutiny of the IRS and
prosecution will follow, where appropriate
New to the “Dirty Dozen” list this year
is the “Claim of Right” deduction scheme
where taxpayers attempt to take a deduction equal to
their wages, claiming it as a “necessary expense
for the production of income.” There is no basis
for such a claim. Proponents have grossly misinterpreted
the Internal Revenue Code.
If it sounds as though there is a huge volume of information
to process, we’ve only touched the tip of the
proverbial iceberg! The good news is that a reputable
tax professional can sort it all out for you... and
now you know how to find one!
Contact: Banklady.com, your credit source for financial
Reference: Internal Revenue Service, www.irs.gov