IRS releases 2007 list of tax scams
The Internal Revenue Service is asking taxpayers to look out for a dozen of this year's biggest schemes.
Not surprisingly, abuse of the telephone excise tax tops the list. I've said enough about that here, for now. But some of the other scams and issues might be worth a few minutes of self-education.
Check out the ones that might impact individual taxpayers, after the jump ...
Phishing. You've gotten the e-mails, right? You know, the ones that seem like they're from the IRS and promise you refunds if you visit a Web site and enter your social security number and credit-card information. For future reference, the IRS doesn't use e-mail to make contact with taxpayers about things like refunds. If you get an e-mail like this and are worried about its veracity, call the IRS at (800)-829-1040. And, as a rule, don't hand out your social security number and other sensitive personal information online.
Dishonest preparers. As in any business, there are some bad eggs in tax prep. And the IRS says some of these dishonest preparers skim cash off their clients' refunds and charge padded fees for their services. Look out for preparers trying to lure you in with promises of large refunds. And don't forget, the IRS says, that if your preparer messes up or makes an illegal move on your return, you're the one who will be held responsible. During the last fiscal year, 109 tax preparers were convicted of tax crimes that carried an average prison sentence of 18 months, according to the IRS.
Scams targeting Native Americans. Though businesses can get a credit for employing Native Americans, don't believe anyone if they tell you that you're eligible for a credit for being a Native American employee. Also, look out for phishing scams and other efforts to steal Native Americans' personal information. Many of these ask for sensitive data to prove consumers tax-exempt status, the IRS says, but Native Americans are still required to pay federal income tax.
Misuse of trusts. Some trusts don't yield the benefits - reduction in taxable income, for example - that their advocates promise to taxpayers. Make sure you know the details of a trust before putting your assets into it. The IRS reports that the government is investigating more than 150 abusive trusts.
Charity cons. You can't deduct your kid's private school tuition as a charitable contribution to a religious group. And you're playing with fire if you try to hide your income or assets from the tax man by shielding them behind a tax-exempt group. The IRS says it also sees taxpayers frequently over-inflating the value of non-cash contributions to charitable organizations.