10. Abuse of Charitable Organizations and Deductions

'Dirty Dozen' Tax Scams for 2012

Do you know where your donations are really going? IRS examiners continue to uncover the intentional abuse of 501(c)(3) organizations, including arrangements that improperly shield income or assets from taxation and attempts by donors to maintain control over donated assets or the income from donated property.

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IRS Names the 'D... The Internal Revenue Service has released its annual list of tax scams. And though taxpayers can encounter these scams at any point during the year, many of them peak during filing season.

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1. Identity Thef... Identity theft is, by far, the biggest problem among tax scams. In response to growing identity theft concerns, the IRS has embarked on a comprehensive strategy that is focused on preventing, detecting and resolving identity theft cases as soon as possible. In addition to the law-enforcement crackdown, the IRS has stepped up its internal reviews to spot false tax returns before tax refunds are issued as well as working to help victims of the identity theft refund schemes.

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2. Phishing Phishing is typically carried out with the help of an unsolicited email or a fake website used to lure potential victims, like this recent IRS refund email scam. This type of scam usually asks a person to provide valuable information. In turn, a criminal has the ability to commit identity or financial theft.

If you receive an unsolicited email that appears to be from either the IRS or an organization closely linked to the IRS, report to phishing@irs.gov.

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3. Return Prepar... Questionable preparers are known to skim off their clients’ refunds, charge inflated fees for return preparation services and attract new clients by promising guaranteed or inflated refunds. Taxpayers should choose carefully when hiring a tax preparer. Click here to learn about the signs of an unethical preparer.

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4. Hiding Income... Numerous individuals have evaded taxes by hiding income in offshore banks, brokerage accounts or nominee entities, using debit cards, credit cards or wire transfers to access the funds. Others have also employed foreign trusts, employee-leasing schemes, private annuities or insurance plans for the same purpose. The IRS works closely with the Department of Justice to prosecute these cases.

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5. “Free Money” ... Beware of false advertisements for free money from the IRS, suggesting that anyone can file a tax return with little or no documentation. Tax tricksters prey on low-income individuals and the elderly, and will often distribute feign fliers in churches.

A number of Social Security scams will also make the rounds this year. Scammers will entice the unsuspecting with promises of non-existent Social Security refunds or rebates.

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6. False/Inflate... Including income that was never earned, either as wages or as self-employment income in order to maximize refundable credits, is another popular scam. This could result in repaying the erroneous refunds, including interest and penalties, and in some cases, even prosecution.

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7. False Form 10... In this ongoing scam, the perpetrator files a fake information return, such as a Form 1099 Original Issue Discount (OID), to justify a false refund claim on a corresponding tax return.

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8. Frivolous Arg... Advocates of these schemes encourage taxpayers to make outlandish claims so they can avoid paying the taxes they owe. The IRS has a list of frivolous tax arguments that taxpayers should avoid -- the arguments are false and have been thrown out of court.

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9. Falsely Claim... Filing a phony information return is an illegal way to lower the amount of taxes an individual owes. Typically, a Form 4852 (Substitute Form W-2) or a “corrected” Form 1099 is used as a way to improperly reduce taxable income to zero. The taxpayer may also submit a statement rebutting wages and taxes reported by a payer to the IRS.

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10. Abuse of Cha... Do you know where your donations are really going? IRS examiners continue to uncover the intentional abuse of 501(c)(3) organizations, including arrangements that improperly shield income or assets from taxation and attempts by donors to maintain control over donated assets or the income from donated property.

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11. Disguised Co... Third parties are improperly used to request employer identification numbers and form corporations that obscure the true ownership of the business.

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12. Misuse of Tr... Deceitful promoters will encourage taxpayers to transfer assets into trusts. While there are legitimate uses of trusts in tax and estate planning, some highly questionable transactions promise reduction of income subject to tax, deductions for personal expenses and reduced estate or gift taxes, as reported by the IRS. Such trusts rarely deliver the tax benefits promised and are used primarily as a means of avoiding income tax liability and hiding assets from creditors, including the IRS.

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The opinions expressed are solely those of the author and do not necessarily reflect the views of Comcast.