IRS Publishes 2016 Dirty Dozen Tax Scams
The IRS has published their annual list of 12 tax scams to look out for in the 2016 tax season. Compiled annually, the “Dirty Dozen” lists a variety of common scams that taxpayers may encounter anytime but many of these schemes peak during filing season as people prepare their returns or hire someone to help with their taxes.
Completing their “Dirty Dozen” list, they warn tax payers against using frivolous tax arguments to avoid paying their taxes. Here’s the scoop:
The IRS released the 2016 version of “The Truth about Frivolous Tax Arguments.” The document describes and responds to some of the common frivolous tax arguments made by those who oppose compliance with federal tax laws. Examples include contentions that taxpayers can refuse to pay taxes on religious or moral grounds by invoking the First Amendment. The cases cited in the document demonstrate how frivolous arguments are treated by the IRS and the courts.
“The IRS and the courts hear many outlandish arguments from people trying to avoid their legal filing and tax obligations,” said IRS Commissioner John Koskinen. “Taxpayers should avoid unscrupulous promoters of false tax-avoidance arguments because taxpayers end up paying what they owe plus potential penalties and interest mandated by law.”
For more information about frivolous tax arguments please visit: www.irs.gov/uac/Newsroom/Frivolous-Tax-Arguments-Completes-the-IRS-Dirty-Dozen-List-of-Tax-Scams-for-the-2016-Filing-Season.
Other scams to look out for this tax season include:
Abusive tax shelters: Using abusive tax shelters and structures to avoid paying taxes continues to be a problem and remains on its annual list of tax scams known as the “Dirty Dozen” for the 2016 filing season.
“Taxpayers should steer clear of unscrupulous promoters who sell phony tax shelters with no real purpose other than to avoid paying what is owed,” said IRS Commissioner John Koskinen. “These schemes can end up costing taxpayers more in back taxes, penalties and interest than they saved in the first place.”
Don’t fake income. Some people falsely increase the income they report to the IRS. This scam involves inflating or including income on a tax return that was never earned, either as wages or as self-employment income, usually in order to maximize refundable credits.
Just like falsely claiming an expense or deduction you did not pay, claiming income you did not earn in order to secure larger refundable credits such as the Earned Income Tax Credit could have serious repercussions. This could result in taxpayers facing a large bill to repay the erroneous refunds, including interest and penalties. In some cases, they may even face criminal prosecution.
Taxpayers may encounter unscrupulous return preparers who make them aware of this scam. Remember: Taxpayers are legally responsible for what’s on their tax return even if it is prepared by someone else. Make sure the preparer you hire is ethical and up to the task.
Don’t improperly claim business credits. Taxpayers should watch for improper claims for business credits. “The IRS is committed to stopping the improper use of business credits and catching the promoters of erroneous claims,” said IRS Commissioner John Koskinen. For example, fraud involving the fuel tax credit is considered a frivolous tax claim and can result in a penalty of $5,000. Furthermore, illegal scams can lead to significant penalties and interest and possible criminal prosecution.
For more dirty dozen scams visit: www.irs.gov.
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