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Inflated Refund Claims Again Made the IRS “Dirty Dozen” List of Tax Scams for the 2016 Filing Season

posted Feb 13, 2016, 10:41 PM by Zaher Fallahi

IRS, Feb. 8, 2016, WASHINGTON                                                

The IRS today warned taxpayers to be on the lookout for unscrupulous tax return preparers pushing inflated income tax refund claims. This particular scam remains on the annual list of tax scams known as the “Dirty Dozen” for the 2016 filing season.

"Be wary of tax preparers that tout outlandish refunds based on federal benefits or tax credits you've never heard of or weren't eligible to claim in the past," said IRS Commissioner John Koskinen. "Taxpayers should choose preparers who file accurate returns."

Compiled annually, the “Dirty Dozen” lists a variety of scams that taxpayers may encounter any time but many of these schemes peak especially during filing season as taxpayers prepare their returns or retain tax professionals to help with their tax returns preparation.  Illegal scams can lead to significant penalties and interest and possible criminal prosecution. IRS Criminal Investigation division works closely with the Department of Justice (DOJ) to shutdown scams and prosecute the criminals committing them.

Don't Fall Victim to Promises of Outlandish Refunds

Scam artists routinely pose as tax professionals during tax season, luring victims in by promising them large tax refunds.

Scam artists use flyers, advertisements, and word of mouth to throw out a wide net for victims. They may spread the word through community groups or churches where trust is high. Scammers frequently prey on people who do not have a filing requirement, such as low-income individuals or the elderly. They also prey on non-English speakers, who may not even have a filing requirement.

Scammers build false hope by duping people into making claims for fictitious rebates, benefits or tax credits. They charge good money for very fraudulent advice. Or worse, file a false return in a person's name and that person never knows about it.

Unscrupulous Scammers also victimize people with a filing requirement and due a refund by promising inflated tax refunds based on fake Social Security benefits and false claims for education related credits, the Earned Income Tax Credit (EITC), or the educational tax credits, etc.

The IRS sometimes hears about scams from victims complaining about losing their federal benefits, such as Social Security benefits, certain veteran’s benefits or low-income housing benefits. The loss of government benefits was the result of false claims being filed with the IRS that provided false income.

While honest tax preparers provide their customers a copy of the tax return they have prepared, victims of scams frequently are not given a copy of the tax returns filed for them. Victims also report that the fraudulent tax refund is deposited into the perpetrator’s bank account. The scammers deduct a large “fee” before paying victims, a practice not used by legitimate tax returns preparers.

The IRS reminds all taxpayers that they are legally responsible for what is on their returns even if it was prepared by another person. Taxpayers who are taken in these schemes can end up being penalized for filing false claims or receiving fraudulent tax refunds.

Taxpayers can help protect themselves by doing a little homework before picking preparers who make refund claims that may sound too good to be true.  Start with the IRS Directory of Federal Tax Return Preparers with Credentials and Select Qualifications.

This tool can help taxpayers find a tax professional with the right qualifications. The Directory is a searchable and sortable listing of certain preparers registered with the IRS. It includes the name, city, state and zip code of:

1- Attorneys

2- CPAs

3- Enrolled Agents

4- Enrolled Retirement Plan Agents

5- Enrolled Actuaries

6- Annual Filing Season Program participants

Also check the preparer’s history.  Ask the Better Business Bureau about the preparer. Check for disciplinary actions and the license status for credentialed preparers. For CPAs, check with the State Board of Accountancy. For attorneys, check with the State Bar Association. For Enrolled Agents, go to IRS.gov and search for “verify enrolled agent status” or check the Directory

To find other tips about retaining a preparer, better understand the differences in credentials and qualifications, research the IRS preparer directory, and learn how to file a complaint against a tax return preparer, visit www.irs.gov/chooseataxpro.

Zaher Fallahi, CPA, Esq., advises taxpayers including Americans Living Abroad with their tax preparation, OVDP, FBAR, FATCA, and tax audits.  He has been rated 10 out of 10 by Avvo  http://www.avvo.com/attorneys/90024-ca-zaher-fallahi-1955056.html  , and named a top tax attorney  http://www.ocbar.org/AllNews/NewsView/tabid/66/ArticleId/1631/Coast-Magazine-Names-OCBA-Members-Top-Attorneys.aspx .  About 1.8% of the US lawyers are also CPAs, and Zaher Fallahi is proudly one of them.  Telephones: (310) 719-1040 (Los Angeles), (714) 546-4272 (Orange County), e-mail taxattorney@zfcpa.com

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