The dirty dozen tax scams: Part 2

You need to know the top tax scams of 2015.

Three things in life are guaranteed. They are death, taxes, and tax scams. Taxpayers must be conscious of fraudulent activity that revolves around tax preparation and filing.

The Internal Revenue Service (IRS) has classified twelve scams as the “dirty dozen” for 2015. This is the last of two articles that will explain schemes that are perpetrated on or by tax payers, part one explains the first six. Here are the last six: 

  • Fake charities: Taxpayers should be aware that illegitimate charities exist. Fake charities solicit donations for their own use. Donations given to these charities are not tax deductible. Tax payers can verify an organization’s ability to accept tax exempt donations. The Internal Revenue Service (IRS) provides the Exempt Organization Select Check for taxpayer use. 
  • Hiding Income with fake documents: Taxpayers file fraudulent tax forms, specifically Form 1099, in an attempt to decrease their tax bill or increase their refund. 
  • Abusive tax shelters: Con artists create elaborate scams to help cheating tax payers hide money and avoid large tax bills. 
  • Falsifying income to claim credits: Tax credits reduce the amount owed to the IRS. Some taxpayers will invent income in order to qualify for these credits. 
  • Excessive claims for fuel tax credits: These credits are limited to farming or off highway business use. However, dishonest taxpayers (or tax preparers) will claim this credit to increase the size of their refund. 
  • Frivolous tax arguments: Taxpayers employ preposterous and absurd arguments to evade the payment of taxes. They are willing to go to court to substantiate these foolish claims. Many times their court cases are dismissed and thrown out of court. Taxpayers can be assessed a $5,000 penalty for filing a frivolous tax return. 

Michigan State University Extension educators warn taxpayers to be on the lookout for the “dirty dozen” tax scams. In addition, remember:

  • The IRS will not call you without having sent a letter first. They will NOT request only certain types of payment, such as debit cards. 
  • Taxpayers should have a clear understanding of what is in their tax return. Taxpayers are responsible for the information in their return even if they had someone else prepare it. 

Michigan State University educators invite you to assess your financial health and visit Michigan State University Extension. In addition, Michigan State University offers money management and homeownership classes. For more information about classes offered in your area visit MI Money Health.

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