In the past few years, the IRS has seen a considerable rise in identity theft and refund fraud, as scammers attempt to get your personal information in a fraudulent email, where they claim to be someone from the IRS or the makers of TurboTax Software. In the email, they claim that they need a greater amount of personal information, which according to the Better Business Bureau is a red flag.
People should not answer these sorts of emails, call any phone numbers listed or click on any links provided in the letter. The email can lead you to a fake website that can harm your computer. Taxpayers who are involved in tax scams such as these are liable for any tax due as well as statutory interest.
Here are the “Dirty Dozen” tax scams that people should be careful to avoid:
1. Identity theft and phishing 2. Hidden offshore income 3. Return preparer fraud 4. Filing false or misleading forms 5. Frivolous arguments 6. False nontaxable social security benefits reports 7. Abuse of charitable deductions 8. Abuse of retirement plans 9. Disguised corporate ownership 10. Filing a false wage amount 11. Misuse of trusts 12. Fuel tax credit fraud
You should remember that if something sounds too good to be true it might just be a fraud. If you know of a tax scam you should report it to the IRS. You can report suspected tax fraud by filling out Form 3949-A, mailing the IRS a letter or calling 1-800-829-3676. As a whistleblower, you may be eligible for a reward.
Getting a letter from the Internal Revenue Service stating you’ve been selected for audit is a taxpayer’s worst nightmare and can create a lot of anxiety.
Sometimes these notices are simple, such as you forgot to sign a document or you made a math error. The more ominous possibilities, however, will question your income, deduction claims, and more.
The IRS definition of an audit states that is simple a review of a taxpayer’s return used to verify the tax amount paid and reported is correct. If you happen to be selected for an audit, the IRS website has videos and guides to help you through the process.
In 2011 alone, nearly 1.6 million people were audited. This is slightly more than 1% of the total returns filed. Three foruths of these were completed by correspondence alone, and only one quarter required a field agent examination (in person.)
On income levels, only 1% of those with an income level of less than $200,000 were audited, while 12.5% of those who made $1 million or more were audited.
A spokesperson for the IRS, Terry Lemons, has said that the majority of taxpayers will never have to worry about an audit because their tax returns are filled out accurately.
While there is no magic equation to how the IRS selects who to audit, TurboTax can help you avoid many of the “red flags,” such as significant differences in income or deductions from those within the same demographic, in your 2012 taxes.
Eight Tips to Help You Determine Your Filing Status
Before you file your federal income tax returns, you must first determine you filing status. There are 5 filing statuses: Married Filing Jointly, Single, Married Filing Separately, Qualifying Widow or Widower with Dependent Child and Head of Household. Your filing status is normally used to determine your standard deductions, filing requirements, eligibility for certain deductions and credits. It also helps in computing correct taxes.
It is important to note that some people may have more than one status. The following are 8 tips to help you when filing your returns. These tips will help you determine your status according to IRS regulations.
Your marital status for the entire year is determined by your marital status on the final day of the tax year.
If you qualify for several filing statuses, choose the one with the lowest tax obligation.
Single filing status applies to you if you are divorced, unmarried or legally separated.
The filing status for married couples is Married Filing Jointly.
If your spouse passed away during the year, you can still use Married Filing Jointly as your filing status for that year.
A married couple might use Married Filing Separately as their individual filing statuses when filing their returns individually.
If your spouse died during the tax year and left you with children who still depend on you, you can choose Qualifying Widow or Widower with Dependent Child provided you did not remarry during the same year.
There is a lot of information regarding tax return filing that the average taxpayer may not know about. For more information about filing your federal return, visit www.irs.gov.
Budget Cuts Have Affected The Performance Of The I.R.S., Report Claims
Due to budget cuts and an ever increasing workload, the IRS is unable to carry out its primary duty of tax collection effectively. This is according to a report in Wednesday’s issue of the Internal Monitor, a publication of the IRS.
Budget cuts have led to staff reductions causing a huge backlog of work. Hundreds of billions of dollars in taxes are not being collected every year because of these changes. This is what the taxpayer advocate, Nina Olson claims in her report to Congress.
In order to discharge its mandate more effectively, the IRS has come up with a number of automated software to enable taxpayers file their returns without having to deal with costly audits.
A study showed that even when taxpayers file their returns correctly using the software, their refunds took too long to process.
Ms. Nelson claims that the due to budget cuts, the agency has resorted to using short cuts that undermine the rights of taxpayers. She now wants the agency’s budget to be increased and the tax code streamlined to make it easy for the average taxpayer to understand.
On the other hand, senior officials at the agency claim that while budget cuts might have reduced service quality, the tax collection system remained fair and balanced.
A senior official at the agency refuted claims that there is a link between erosion of taxpayer rights and the challenging budget environment as baseless and inaccurate.
The report came at a time when the mandate of the IRS has been extended to oversee the health care scheme proposed by the President and Congressional Democrats.
The U.S. Internal Revenue Service (“IRS”) fields thousands of complaints annually from taxpayers concerned about suspicious faxes, e-mails, phone calls, and printed notices. Parties initiating such correspondence invariably purport to be IRS representatives. Many such scams even employ forged IRS insignia to entice a response. Known as “phishing,” the common objective of these scams is tricking unsuspecting taxpayers into disclosing sensitive financial and personal data. This info is then used to steal your money or identity.
Following are five facts to know about all forms of phishing:
Legitimate IRS communications never solicit in-depth personal or financial data like passwords, PIN codes, or other such sensitive information.
The IRS never initiates taxpayer contact via e-mail in order to obtain financial or personal information. Any email that purports to come from the IRS or attempts to direct you to an alleged IRS website should be handled as follows:
Never respond to such message(s);
Never open any attached file(s), as they typically conceal malware codes that could infect your entire system.
Do not click any internal links. If you have already clicked on any such suspicious email link(s) or revealed sensitive information, promptly visit the official IRS webpage and conduct an internal site search for “identity theft” to glean further assistance.
The official IRS website is “www.IRS.gov.” Do not be misled or deceived by IRS impersonators whose URLs end with “.com,” “.net,” “.org”, or any domain or designation other than “.gov.” If you encounter a suspicious site that purports IRS affiliation, do not supply any sensitive or confidential personal or financial data. Report its URL and all other relevant information to the IRS immediately.
If you get a fax, letter, or phone call from any party claiming to be with the IRS that seems suspicious in any way, call the IRS hotline at 1-800-829-1040 immediately to learn if any legitimate need for IRS contact with you currently exists. Report any false communications immediately. Forward phishing emails promptly to [email protected]
You can do your patriotic duty and serve a valuable public service by preventing victimization of your fellow citizens. Full details and further information about reporting procedures for specific tax scams may be found at www.IRS.gov. Click on the “phishing” hyperlink featured within the website’s homepage. Complete the brief form with all requested information. Such “small” individual steps are imperative to effective stamping out of tax scams.