Tag Archives: phishing

The 2015 IRS Dirty Dozen Tax Scams

Share Button

For some, the term “dirty dozen” may bring to mind the World War II action movie, or the Environmental Working Group’s list of the fruits with the highest pesticide concentration, but it means something very different to the Internal Revenue Service (IRS).  Each year, the IRS releases a list of their “dirty dozen” – the twelve most prevalent tax scams affecting the nation’s taxpayers.

The IRS creates this list to raise awareness of the various types of schemes that may affect taxpayers’ returns, and to offer guidance on steps that can be taken to help prevent falling victim.  Many of these scams involve criminals preying on Americans’ fear of both the IRS and of making an error on their tax return, or their desire for a greater refund or smaller tax bill.

Whether you have already filed your 2014 tax returns or not, you should be on the lookout for these scams so that you do not fall victim.  Ultimately, as the taxpayer, you are responsible for what is on your return regardless of who prepares it.

  1. Phone Scams: Criminals impersonating IRS agents make aggressive and threatening phone calls to taxpayers.  Typically, scam artists threaten arrest, deportation, license revocation or other punishment to scare taxpayers into providing identifying information or sending money.  Remember: The IRS will never initiate contact with a taxpayer over the phone.  If you owe money to the IRS, you will receive a written notice first.
  2. Phishing: Common avenues for scam artists are fake emails or websites that steal personal information.  Be wary of clicking on strange emails and websites that appear to be from the IRS. The IRS will not initiate contact by email about a bill, refund, or any other matter.
  3. Identity Theft: Tax season is a peak time for identity theft.  Criminals and scam artists use other taxpayers’ Social Security numbers to file fraudulent returns to obtain refunds.  Carefully guard your personal information to not fall victim to identify theft.  If you have reason to believe that you have been the victim of identity theft, contact your Aronson tax advisor immediately.
  4. Return Preparer Fraud: Taxpayers need to be careful of dishonest or corrupt tax return preparers.  While most tax preparers provide quality service, some set out to commit identity theft, refund fraud, and other scams.  Be careful to choose a preparer that is legitimate.
  5. Offshore Tax Avoidance: The IRS is cracking down on Americans hiding money offshore, and is becoming more successful in its enforcement of this method of tax cheating.  It is highly recommended that taxpayers voluntarily get their international filing requirements in order.  The IRS offers the Offshore Voluntary Disclosure Program (OVDP) to help taxpayers do so.
  6. Inflated Refund Claims: If anyone promises you an extravagant refund, asks you to sign a blank return, or charges fees based on a percentage of the refund, you should be wary about handing over the preparation of your return.
  7. Fake Charities: Taxpayers must be cautious of the charitable organizations to which they choose to contribute. There are numerous groups that fraudulently appear to be a charitable organization to obtain donations from unsuspecting individuals.  Take some time to ensure you are donating to a legitimate and eligible charity and watch out for charities that have similar names to well-known organizations.
  8. Hiding Income with Fake Documents: This type of fraud involves the use of doctored or fake documents in an attempt to hide or reduce taxable income.  Most sources of income are independently reported to the IRS, so this scam may slow down the matching process, but the IRS will eventually come after the taxpayer for the tax due, plus penalties and interest.
  9. Abusive Tax Shelters: Taxpayers should be wary of complex tax avoidance schemes, and steer clear of the use of abusive tax structures in an attempt to avoid taxes.  If you are questioning a method to reduce your tax liability or avoid paying tax in any form, you should seek an independent opinion regarding its legality.
  10. Falsifying Income to Claim Credits: While most scams involve hiding or shifting income to reduce a tax bill, many taxpayers inflate their income to meet certain thresholds for refundable tax credits.  This scam can create a refund for a taxpayer who owes little or no tax.  Again, most sources of income are reported to the IRS, so eventually the Service will come knocking.
  11. Excessive Claims for Fuel Tax Credits: This tax credit is not available to the majority of taxpayers, but is routinely used as a way to claim a credit and inflate refunds.  This credit is only available for fuel purchased for non-highway business use, such as farming.  The IRS has instituted measures to carefully scrutinize returns claiming this credit, as it is a frequent vehicle for tax scammers.
  12. Frivolous Tax Arguments: Every year, taxpayers raise numerous arguments as to why they, or their wages, are not subject to taxation, and every year these arguments are struck down as frivolous claims.  Taxpayers have the right to contest their tax liabilities in court; however, their claims must have a sound legal basis. The IRS can assess a $5,000 penalty for filing a frivolous tax return.

In the next few months, Aronson’s tax advocacy experts will be releasing more in-depth blogs regarding some of these tax scams.  However, if you are concerned you have fallen victim to one of these scams or want further information on the dirty dozen, please contact Patrick M. Deane, JD, MBA, LLM or Laurence C. Rubin, CPA at 301.231.6200.

Share Button

How to Protect Yourself from Taxpayer Identity Theft

taxpayer identity theft
Share Button

In the most recent Fact Sheets published by the Internal Revenue Service (IRS) in January 2015, the IRS highlights its continuous efforts to combat taxpayer identity theft. Tax-related identity theft occurs when someone uses a stolen Social Security Number (SSN) to file a false return and claim a fraudulent refund.

The IRS advises taxpayers to heed the following warning signs and take steps to help mitigate risk.

Warning Signs (usually communicated via IRS notice or letter) of tax-related identity theft:

  • More than one return filed under your SSN.
  • You owe additional tax, have a refund offset, or have had collection actions taken against you for a year you did not file a tax return.
  • IRS records indicate you received more wages than you actually earned or wages from an employer unknown to you.
  • Your state or federal benefits were reduced or cancelled because the agency received information reporting a change in income.

Steps to take for victims of tax-related identity theft:

  • File a report with local police.
  • File a complaint with the Federal Trade Commission at identitytheft.govor the FTC Identity Theft Hotline at 1-877-438-4338.
  • Contact one of the three major credit bureaus to place a ‘fraud alert’ on your credit records:
  • Close any accounts opened without your permission or tampered with.
  • Respond immediately to any IRS notice; call the number provided.
  • Complete IRS Form 14039, Identity Theft Affidavit. Use a fillable form at IRS.gov, print, then mail or fax according to instructions.
  • Continue to pay your taxes and file your tax return, even if you must do so by paper.

Ways to reduce the risk of becoming a victim of tax-related identity theft:

  • Don’t routinely carry your Social Security card or any document with your SSN on it.
  • Don’t give a business your SSN just because someone asks – only when absolutely necessary.
  • Protect your personal financial information at home and on your computer.
  • Check your credit report annually.
  • Check your Social Security Administration earnings statement annually.
  • Protect your personal computers by using firewalls, anti-spam/virus software, update security patches and change passwords for Internet accounts.
  • Don’t give personal information over the phone, through the mail or over the Internet unless you have initiated contact or are sure you know who is asking.

Finally, please be aware that the IRS does not contact taxpayers via email, phone, tax messages or any other social media channels; rather all communication is done through written correspondence.

For more information on identity theft or your individual tax situation, please contact your Aronson advisor or Anatoli Pilchtchikov of Aronson’s Personal Financial Services Group at 301.231.6200.

Share Button

The IRS Dirty Dozen Tax Scams for 2015

Share Button

For the past few years, the IRS has issued a list of the twelve most pervasive tax scams, dubbed the “Dirty Dozen.”  Through 2014, the list has been issued in one release.  For 2015, the IRS has decided to release one issue at a time over 12 days, to raise awareness.

Most items on the 2014 list will be making a return; indeed, phone scams, phishing, and ID theft continue to make the list.  New for 2015 is return preparer fraud, which has become a serious problem both for the IRS and for taxpayers, costing millions of dollars in lost revenue and big headaches for taxpayers who have fallen victim.

Even the most aware and diligent people get taken in by various tax scams.  When in doubt, contact a trusted tax professional before taking any action.  For further information on the IRS Dirty Dozen or to discuss your specific situation, please contact your Aronson tax advisor at 301.231.6200.

Share Button

Is Your Business Susceptible to Cybercrime?

Share Button

There are many forms of cybercrime that can affect a small-to-medium-sized business. The AICPA recently released a study of the top five cybercrimes in virtual environments. They include:

  1. Tax refund fraud
  2. Corporate account takeover
  3. Identity theft
  4. Theft of sensitive data
  5. Theft of intellectual property

While all are to be taken seriously and need to be considered, corporate account takeover and theft of sensitive data are particularly important concerns for businesses.

In a corporate account takeover, network login credentials are taken in order to gain unauthorized access to corporate functions (such as banking). Transactions can then be made by the criminal, which appear totally legitimate.

With theft of sensitive data, a cybercriminal gains access to a company’s private data for their own use. The most common examples of this type of theft include credit card numbers, social security information, trade secrets, or other personally identifiable information. Often, a security breach is not found until after long after the breach, allowing further intrusion with the passage of time. Small-to-medium-sized businesses are particularly vulnerable to both of these threats due to fewer controls in place and less attention paid to information security.

Some of the strongest weapons (as ranked by the Computer Security Institute) against cybersecurity vulnerabilities are security audits and control reviews, adequate business insurance, and strong incident response plans. A security audit can identify the major risks and help determine the proper preventive controls to put in place. The development of an incident response plan and determination of how an entity deals with a cybercrime can provide additional insight into possible vulnerabilities. These threats can also be remedied through proper control and policy development.

If you have any questions regarding your company’s cybersecurity or other IT policy questions, please contact Jeff Cook of Aronson’s IT Audit and Advisory Services Group at 301.231.6220.

Share Button

As Tax Year Closes, Be Wary of IRS’s Dirty Dozen Tax Scams

Share Button

Each year, the IRS issues its “Dirty Dozen” tax scams. This list comprises those tax scams of which the IRS is particularly mindful. In some respects, the list is a warning to taxpayers not to commit these frauds in filing their tax returns, but in large part the list is published to warn taxpayers of the dangers they may face from promoters or others looking to defraud taxpayers themselves.   The IRS releases the list in the spring of each year, shortly before the tax filing deadline, noting that some scams peak at that time, but the IRS also warns that many of the scams are present throughout the year. Certainly, taxpayers should also be wary of these scams at the end of the year, in connection with their year-end tax planning.

The “Dirty Dozen” tax scams for 2013 are as follows:

  1. Identify Theft – These scams involve the use of a taxpayer’s personal identification to fraudulently file a tax return in a legitimate taxpayer’s name and obtain a refund.
  2. Phishing – Through fraudulent emails that purport to come from the IRS or a closely-linked organization, others can obtain taxpayers’ personal information and use it for various fraudulent purposes, related or unrelated to refunds.
  3. Return Preparer Fraud – Unsuspecting taxpayers may be defrauded by their own preparers, but they are still responsible for what is reported on their returns. Taxpayers should only use preparers who sign returns and provide their Preparer Tax Identification Numbers (PTINs).
  4. Hiding Income Offshore – Taxpayers often use offshore banks, brokerage accounts and other entities, sometimes to hide income, and sometimes for legitimate means, but even when the purpose is legitimate there are still reporting requirements of which taxpayers must be mindful.
  5. Free Money” from the IRS and Tax Scams Involving Social Security – Flyers from fraudulent promoters, and typically geared towards elderly or low-income taxpayers, may falsely promise social security refunds or other fictitious refunds or rebates.
  6. Impersonation of Charitable Organizations – Fictitious charities tend to spring up after major disasters, soliciting contributions under false pretenses and possibly using personal identification for identify theft purposes. Taxpayers should be particularly wary of these scams when making end-of-year contributions.
  7. False/Inflated Income and Expenses – Inflating expenses is a common way to reduce taxable income, but some taxpayers may inflate income to take advantage of refundable credits that are dependent on income levels.
  8. False Form 1099 Refund Claims – Some individuals may file a fictitious information return to justify false deductions and thus a false refund claim on a corresponding tax return.
  9. Frivolous Arguments – Promoters may suggest raising frivolous arguments that have already been rejected by courts. They are plentiful, pertaining to such broad categories as the supposedly-voluntary nature of the federal income tax system, the meaning of “income” or other terms in the Internal Revenue Code, constitutional amendment claims, and fictional legal bases why one need not file a tax return.
  10. Falsely Claiming Zero Wages – Taxpayers sometimes seek to reduce income, possibly to zero, using a Form 4852 (substitute Form W-2) or a “corrected” Form 1099.
  11. Disguised Corporate Ownership – Taxpayers may set up shell companies to obscure true ownership of a business, underreport income, claim fictitious deductions, participate in listed transactions (tax shelters) or facilitate money laundering or other crimes.
  12. Misuse of Trusts –Promoters often misuse trusts to fraudulently reduce taxable income, deduct personal expenses, or reduce gift or estate taxes.

View the “Dirty Dozen” list at IRS.gov for more information on these scams and check back with Aronson for a new post this spring when the IRS releases its “Dirty Dozen” tax scams for 2014.

Share Button

View Archives

Blog Authors

Latest Webinar Videos