Being self-employed generally involves hard work and lots of it. Through social media and pop-up scams, marketing firms advertise assistance with applications for tax credits to businesses for which they are not eligible, or tax credits that might not even exist. Be cautious when encouraged to submit documents and apply for a “self-employment tax credit,” Earned Income Tax Credit (EITC), or even a Fuel Tax Credit. If it sounds too good to be true, it probably is, and it could trigger a closer look from the IRS. Speak with a trusted tax attorney before filing potentially fraudulent documents.
Not every tax preparer has your best interests in mind. A skilled, honest tax preparer can save you time and money on your tax returns. Those who inflate expenses and fabricate deductions are another matter. The IRS points out that preparers who refuse to include their Preparer Tax ID number (PTIN) are likely of questionable reputation. Be cautious when retaining a tax preparer, and remember that you are responsible for everything on the return when you sign on the bottom line.
Art fraud takes several forms. Some promoters encourage taxpayers to purchase artwork at low prices and then claim inflated appraised values for charitable donation deductions. Do not fall for scams promising big tax deductions for high-value art purchased dirt cheap. The IRS reviews questionable appraisals, and inflated charitable donations can result in denied deductions, penalties, or additional scrutiny.
If you are being encouraged to manipulate your withholding amounts and falsely report your income for a higher refund, think twice. It is also pretty difficult to argue that intentionally misreporting your income is not willful. Avoid the penalties and potential criminal tax investigation. Steer clear of providing inaccurate figures anywhere on your tax returns.
These scams often promise the same thing: You pay someone to create a sure-thing Offer in Compromise (OIC) that offers pennies on the dollar to the IRS, which then accepts your offer and wipes your slate clean. An OIC is an important debt reduction tool for some people in the right circumstances, but not for many. An Offer in Compromise is available only to taxpayers who meet strict eligibility requirements. Despite what promoters claim, most taxpayers do not qualify. Remember, the IRS is more interested in recovering whatever tax debt it can, not necessarily in offering you a fresh start.
If you are thinking about an OIC, learn what they can and cannot do by downloading our free resource about resolving tax debt with an OIC. If you feel you are a good candidate, speak with a reputable tax professional or a tax lawyer, not a pop-up scammer looking for your fee.
The IRS once again warns this year of the growing number of malware and spear-phishing scams aimed at accountants, CPAs, financial professionals and tax preparers. Be sure you have a Written Information Security Plan (WISP) and engage in cybersecurity best practices to avoid having your business or client information compromised.
That is the Dirty Dozen list for another year. It is a lot to remember and even more to avoid.
If you have questions about one of these tax scams, money laundering, or payroll tax theft, contact Robert J Fedor, L.LC, at 440-250-9709 to speak with one of our criminal tax lawyers for guidance about your situation. We serve clients internationally and throughout the U.S. from our offices in Cleveland and Chicago.