Avoiding And Reporting Tax Scams

How to Avoid the “Dirty Dozen” Tax Scams

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.

How Does The IRS Choose Who To Audit?

Quick Facts About the IRS Audit

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.

Tax Carnival Ecstasy – January 24, 2012

Welcome to the January 24, 2012 edition of Tax Carnival Ecstasy. In this edition we have DeWitt Dudley explaining how to Report Your Japanese/Foreign Inheritance. The Effective Tax Rate is Not As Simple As It Seems accoring to Patrick LaRue at 2010 Tax. Eva reports that there are Three Days Extra To File Taxes in 2012. And finally we have Robert Moore reporting that the IRS plans to Audit more taxpayers in 2011 than in previous years. Hope you enjoy the material, bookmark, share, tweet, like on Facebook and come back soon.

DeWitt Dudley presents Protecting The Owners and Stock In A Closely Held Corporationposted at Law Offices of Givner & Kaye, saying, “Operating a business in a closely held corporation can be an excellent way to protect the owner from problems with the business. If the business is adequately capitalized, then someone suing the business may not be able to “pierce the corporate veil” and get to the personal assets of the owner.”

DeWitt Dudley presents Reporting Your Japanese or Foreign Inheritance posted at Los Angeles Asset Protection, Estate Planning, Tax Planning Blog, saying, “For complex tax issues, do not settle, contact the Tax Law Experts at Givner & Kaye. We’re dedicated and aggressive. Contact us today. (310) 207-8008”

deductions

Patrick LaRue presents How to Choose Your IRA CD Investment posted at 2010 Tax, saying, “Many IRA account holders who want to increase their retirement funds in a risk free way look into certificate of deposits.”

tax law

Patrick LaRue presents Effective Tax Rate: Not As Simple As It Seems posted at2010 Tax, saying, “Mitt Romney recently expressed the belief that his effective tax rate is roughly 15 percent. Most people become incredulous upon hearing this claim.”

taxes

Mitt Romney at one of his presidential campaig...
Image via Wikipedia

Steve presents How to Avoid Meeting the Inheritance Tax Threshold posted at 2008 Taxes, saying, “Did you know that whenever anyone dies, the money and the property which is left to the beneficiaries are subject to an inheritance tax?”

Eva presents Three Days Extra To File Taxes in 2012 posted at Best Online Tax Software.

Tommy John presents The IRS is Making Immense High-Tech Strides posted at 2010Taxes, saying, “Electronic Filing Services Are Taxpayers’ First Choice!”

Robert Moore presents More IRS Audits Planned in 2012 posted at 2011 Taxes, saying, “Nobody likes being audited by the IRS, although the chances of being audited are now actually higher as there are more of them planned.”

tips

Rachel C. presents 10 Hidden Ways to Save Money on Auto Insurance posted at Auto Insurance Quotes, saying, “When it comes to saving money on car insurance, there are some things that you can control and some things that you can’t. You’re probably already aware of the importance of maintaining an excellent driving record and owning a reasonable vehicle in order to get low rates. There are several other special discounts floating around out there that aren’t often advertised. Familiarize yourself with the following list of special auto insurance discounts and mention them to your insurance company to see if you qualify.”

That concludes this edition. Submit your blog article to the next edition of tax carnival ecstasy using our carnival submission form. Past posts and future hosts can be found on our blog carnival index page.

 

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The Effects Of Budget Cuts In The IRS

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.

Do Not Fall For Trecherous Tax Scams

Do Not Be Deceived By Cyber Criminals’ Tax Scams!

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.