Five fresh tricks highlighted in this year’s annual IRS Dirty Dozen list of the most widespread tax scams: Internet ScamBusters #325
We all know about phishing, but that’s just one of a whole
batch of tricks identified by the IRS in its annual “dirty
dozen” list of the most common tax scams.
There are five newcomers to this year’s list — many of them
the result of incorrect or misleading advice from tax
preparers or bogus scheme promoters, and some of them just
false information entered on tax returns.
Since it’s tax season, this week we take you through the full
dirty dozen countdown.
As always, we recommend you begin by taking a look at this
week’s issue of Scamlines — What’s New in Scams?
We also recommend you check out the most popular articles from
our other sites during the past week:
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Avoiding The Pitfalls Of Credit Card Use: Credit card practices to avoid the next time you pull your credit card out for your next purchase.
Tips That You Can Use Right Now To Get Out Of Debt: Steps you can take to get out of debt and back on the road to financial stability.
Heartworm Pills for Dogs Are a Must For Every Pet Owner: Check out these preventative tips on why heartworm pills are so important for your dog.
Let’s check out…
IRS Lists New “Dirty Dozen” Tax Scams
As we all knuckle down to the disagreeable task of completing
our annual tax returns, the IRS has released its latest list
of the 12 most widespread tax scams to watch out for. They
call it the “dirty dozen” and this year’s recently-published
list includes five new scams, as well as some of the
old-familiars, like phishing.
In fact, as in earlier years, most of the tax scams have more
to do with tall tales told by disreputable tax advisers or
straight fraud attempts by individuals than they do with
tricks perpetrated by crooks who merely want to get hold of
our personal financial details so they can steal our
“If you use a professional,” says IRS Commissioner Mark
Everson, “pick someone who is reputable.”
So, bearing that sound piece of advice in mind, here, in the
order given by the IRS, are the 2009 “dirty dozen” tax scams
(newcomers are marked with an asterisk):
1. Telephone excise refund
This special one-off (so far) refund covers the excise sum
that appears on your monthly phone bill. But some individuals
and preparers are trying to use it to write off the whole
amount of their phone bills.
2. Roth IRAs
In this tax scam, properties or common stock are moved into
the shelter of a Roth Individual Retirement Account (IRA) at
way below their true value, circumventing the annual
contribution limit — till the IRS spots it!
In Scambusters’ view, this is always the number one tax scam,
where crooks try to pass themselves off as the IRS, to trick
you into giving them bank and other personal financial
details. For more on phishing, see Phishing Scams: How You Can Protect Yourself, as well as
NEW IRS Notice is Really a Phishing Scam, which is specifically on taxes.
4. Disguised corporate ownership
Bit obscure this one, but basically it refers to setting up a
shell company to disguise the true ownership or the nature of
your finances. They are used for money laundering, to
under-report income or to totally avoid filing a tax return.
5. Zero wages
We first talked about this tax scam a couple of years back in our article
Tax Scams: What You Really Need to Watch Out for.
Employers file W-2s showing an individual’s earnings, then the
individual files a “corrected” W-2 reducing or zeroing the
amount earned, claiming the original one was wrong.
6. Return preparer fraud
This is a catch-all for the array of tax scams used by
disreputable preparers. They include “skimming” clients’
refunds or charging inflated fees. Oftentimes these preparers
lure in their victims by promising huge refunds, which either
don’t follow or are based on fraudulent returns.
7. American Indian employment credit
Two variations of this tax scam:
* Firms that employ Native Americans can claim employment
credits but employees of the business can’t — but that
doesn’t stop them from trying.
* Unscrupulous promoters tell Native Americans that they’re
not subject to federal taxation, advising them to use a form
W-8 BEN to claim exemption. Not true.
8. Trust misuse
Taxpayers transfer assets into special trusts they’ve been
told offer tax benefits. Many don’t (the IRS is currently
investigating more than 150 such trusts at the moment). Some
genuine trusts are tax efficient — talk to a respected
professional for advice.
9. Structured entity credits
Another obscure one. It’s a newcomer this year and refers to
partnerships set up to own and sell things like state
conservation easement credits and federal rehabilitation
credits. The partnership then declares a total loss, which
supposedly can be deducted from returns. In fact, the
investments are not regarded as “valid” by the IRS and are not
10. Charitable deductions
In this tax scam, a taxpayer moves assets or income to a
supposedly tax-exempt organization like a charity, but retains
control over those assets. Not allowed. Another common and
better known scam is the overvaluation of property donated to
11. Form 843 tax abatement
A filer requests abatement of previously assessed taxes using
IRS Form 843. Often, the scammer has not previously filed tax
returns and the tax they are trying to have abated has been
imposed through the IRS Substitute for Return program. Any
request for abatement is obviously closely scrutinized by the
12. Frivolous arguments
This covers a whole bunch of tax scams based on what the IRS
calls “outlandish claims” — things like the Sixteenth
Amendment to the Constitution (relating to Congress’s power to
collect taxes) was never ratified, that wages are not income,
that paying taxes is voluntary or that Form 1040 violates the
Fifth Amendment right against self-incrimination. These
arguments have been tested in court — and thrown out!
So that’s the 2009 dirty dozen. But remember one important
thing: They’re just what the IRS considers the most blatant
scams. There are lots more to beware of.
For example, check out these earlier Scambusters articles on
some other IRS scams and tax form scams.
After all, paying taxes is painful enough for most of us
without the tricksters taking us for an extra expensive ride.
Sad to say but, if you plan to use someone else to prepare
your taxes but can’t work with an established reputable
professional, then you’re probably safer and better off doing
As Commissioner Everson says: “Taxpayers should remember they
are ultimately responsible for what is on their tax return,
even if some unscrupulous preparers have steered them in the
Next week we move to a more pleasant topic!
That’s all for today — we’ll see you next week.