IRS Warns Over Slavery Reparation Tax Refund Scams

by Mike Godfrey, Tax-News.com, Washington

29 January 2002

The US Internal Revenue Service on Monday issued a nationwide alert over bogus slavery reparation claims. According to the IRS, the scam, which usually involves the descendants of slaves paying the promoter to prepare tax refund claims under a 'secret' clause of the tax code, is most prevalent in Southern US states, but has spread alarmingly, which has spurred the US tax authorities into action.

Claims for 'black inheritance tax refunds' and 'reparations for African Americans' on tax returns reportedly leapt to 80,000 in 2001, compared with just 13,700 the previous year.

'These snake-oil salesmen are shamelessly preying upon people,' explained IRS Commissioner, Charles Rossotti. 'They build false hopes and charge people good money for bad advice on reparation refunds. In the end, victims discover their refund claims are rejected, and their money and the promoters are long gone.'

In an attempt to clamp down on the promoters of the bogus reparation schemes, the IRS has announced that it will be distributing information through church groups, political leaders, and organizations representing African Americans. However, it also plans to get tougher with taxpayers filing these claims, who have traditionally been treated with a degree of leniency.

From April 15, such claims will be treated in the same way as other 'frivolous' tax claims, and African American taxpayers will be given just one chance to withdraw the claim before facing a fine of $500. Currently, penalties are not imposed until the IRS has rejected two such frivolous claims from the same person.

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