IRS Warning – List of Tax Scams

IR-2018-54, March 14, 2018

WASHINGTON — As part of the “Dirty Dozen” list of tax scams, the Internal Revenue Service today warned taxpayers to avoid falsely inflating deductions or expenses on tax returns.

Common areas targeted by unscrupulous tax preparers involve overstating deductions such as charitable contributions, padding business expenses or including credits that they are not entitled to receive – like the Earned Income Tax Credit or Child Tax Credit. Some taxpayers also may be tempted to take these steps in hopes of getting a larger refund or paying less than what is owed.

Padding deductions is part of this year’s “Dirty Dozen” lists of common tax scams. Taxpayers may encounter these any time, but many of these schemes peak during the tax filing season as people prepare their returns or hire people to help with their taxes.

The IRS reminds taxpayers to be careful when claiming these credits. If a return preparer suggests using these options improperly, the taxpayer is at risk – and the person who provided the advice is long gone.

Avoids Scams and File an Accurate Return

Preparing an accurate tax return is a taxpayer’s best defense against scams – and the best way to avoid triggering an audit. The IRS reminds taxpayers that significant penalties may apply for taxpayers who file incorrect returns including:

  • 20 percent of the disallowed amount for filing an erroneous claim for a refund or credit.
  • $5,000 if the IRS determines a taxpayer has filed a “frivolous tax return.” A frivolous tax return is one that does not include enough information to figure the correct tax or that contains information clearly showing that the tax reported is substantially incorrect.
  • In addition to the full amount of tax owed, a taxpayer could be assessed a penalty of 75 percent of the amount owed if the underpayment on the tax return resulted from tax fraud.

Taxpayers may be subject to criminal prosecution and be brought to trial for actions such as willful failure to file a return; supply information; or pay any tax due; fraud and false statements; preparing and filing a fraudulent return and identity theft.

One way for taxpayers to ensure they file an accurate tax return and claim only the tax benefits they’re eligible to receive is by using tax preparation software. Question and answer formats lead taxpayers through each section of the return. Prepare and e-file federal taxes free with IRS Free File. Taxpayers with income of $66,000 or less can file using free brand-name tax software. Those who earned more can use Free File Fillable Forms, the electronic version of IRS paper forms. Either way, everyone has a free e-file option, and the only way to access Free File is on IRS.gov.

Community-based volunteers at locations around the country also provide free face-to-face tax assistance to qualifying taxpayers. Volunteers help taxpayers file taxes correctly, claiming only the credits and deductions they’re entitled to by law.

Taxpayers should know that they are legally responsible for what is on their tax return, even if it is prepared by someone else.

To find tips about choosing a return preparer, better understand the differences in credentials and qualifications, research the IRS preparer directory, and learn how to submit a complaint regarding a tax return preparer, visit www.irs.gov/chooseataxpro.

More information about IRS audits, the balance due collection process and possible civil and criminal penalties for noncompliance is available at the IRS website.

Taxpayers can also learn more about the Taxpayer Bill of Rights at IRS.gov. This is a set of fundamental rights each taxpayer should be aware of when dealing with the IRS, including when the IRS audits a tax return.