Phishing Scams And Frivolous Arguments Top The 2008 Tax Scams, Announce IRS

by Mike Godfrey, for LawAndTax-News.com, Washington

17 March 2008

The US Internal Revenue Service (IRS) issued its 2008 list of the 12 most egregious tax schemes and scams on Friday, highlighting in particular Internet phishing scams and several frivolous tax arguments.

Topping this year’s list of scams is phishing, which encompasses numerous Internet-based ploys to steal financial information from taxpayers. New to the “Dirty Dozen” this year is a scheme, which IRS auditors discovered, that relates to unreasonable and/or excessive fuel tax credit claims.

“Taxpayers should be wary of scams and promises to avoid paying taxes that seem too good to be true,” Acting IRS Commissioner Linda Stiff cautioned.

“There is no secret formula that can eliminate a person’s tax obligations. People should be wary of anyone peddling any of these scams,” she added.

Tax schemes can lead to problems for both scam artists and taxpayers. Tax return preparers and promoters also risk significant penalties, interest and possible criminal prosecution.

The top five schemes that the IRS is urging taxpayers to avoid include:

1. Phishing

Phishing is a tactic used by Internet-based thieves to trick unsuspecting victims into revealing personal information they can then use to access the victims’ financial accounts. These criminals use the information obtained to empty the victims’ bank accounts, run up credit card charges and apply for loans or credit in the victims’ names.

Phishing scams often take the form of an e-mail that appears to come from a legitimate source. Some scam e-mails falsely claim to come from the IRS. To date, taxpayers have forwarded more than 33,000 of these scam e-mails, reflecting more than 1,500 different schemes, to the IRS.

2. Scams Related to the Economic Stimulus Payment

Some scam artists are trying to trick individuals into revealing personal financial information that can be used to access their financial accounts by making promises relating to the economic stimulus payment, often called a “rebate.” To obtain the payment, eligible individuals in most cases will not have to do anything more than file a 2007 federal tax return.

But the tax authority revealed that some criminals posing as IRS representatives are trying to trick taxpayers into revealing their personal financial information by falsely telling them they must provide information to get a payment - the IRS will not contact taxpayers by phone or e-mail about their stimulus payment.

3. Frivolous Arguments

Promoters of frivolous schemes encourage people to make unreasonable and unfounded claims to avoid paying the taxes they owe. Most recently, the IRS expanded its list of frivolous legal positions that taxpayers should stay away from. Taxpayers who file a tax return or make a submission based on one of these positions on the list are subject to a USD5,000 penalty.

4. Fuel Tax Credit Scams

The IRS is receiving claims for the fuel tax credit that are unreasonable. Some taxpayers, such as farmers who use fuel for off-highway business purposes, may be eligible for the fuel tax credit. But some individuals are claiming the tax credit for nontaxable uses of fuel when their occupation or income level makes the claim unreasonable. Fraud involving the fuel tax credit was recently added to the list of frivolous tax claims, potentially subjecting those who improperly claim the credit to a USD5,000 penalty.

5. Hiding Income Offshore

Individuals continue to try to avoid paying US taxes by illegally hiding income in offshore bank and brokerage accounts or using offshore debit cards, credit cards, wire transfers, foreign trusts, employee leasing schemes, private annuities or life insurance plans. The IRS and the tax agencies of US states and possessions continue to aggressively pursue taxpayers and promoters involved in such abusive transactions.

While the IRS has seen a decline in the occurrence of some of these scams, other problems, such as abuse of the American Indian Employment Credit and misuse of structured entity credits, continue to be areas of concern. The absence of a particular scheme from the Dirty Dozen should not be taken as an indication that the IRS is unaware of it or not taking steps to counter it.

Suspected tax fraud can be reported to the IRS using IRS Form 3949-A, Information Referral.

Recommended