IRS Warns of New Emerging Tax Scam
The Internal Revenue Service is warning senior citizens, working families, church members and other potential victims to beware of an emerging tax scam that tempts them into filing fraudulent tax returns claiming bogus refunds.
The scheme promises refunds to people who have little or no income and normally don’t have a tax filing requirement. The scam promoters informs victims about a tax refund or nonexistent stimulus payment based on the American Opportunity Tax Credit, even if the victim was not enrolled in or paying for college.
In recent weeks, the IRS said Friday that it has identified and stopped an upsurge of these bogus refund claims coming in from across the United States. The IRS is actively investigating the sources of the scheme, and its promoters may be subject to criminal prosecution.
“This is a disgraceful effort by scam artists to take advantage of people by giving them false hopes of a nonexistent refund,” said IRS Commissioner Doug Shulman in a statement. “We want to warn innocent taxpayers about this new scheme before more people get trapped.”
Typically, con artists falsely claim that refunds are available even if the victim went to school decades ago. In many cases, scammers are targeting senior citizens, people with very low incomes, and members of church congregations with dubious promises of free money.
The IRS has also seen a variation of the scheme that incorrectly claims the college credit is available to compensate people for paying taxes on groceries.
The IRS said it has already detected and stopped thousands of these fraudulent claims. Nevertheless, the scheme can still be quite costly for victims. Promoters may charge exorbitant upfront fees to file the bogus claims and are often gone long before the victims discover they’ve been scammed.
The IRS is reminding people to be careful because all taxpayers, including those who use paid tax preparers, are legally responsible for the accuracy of their returns, and must repay any refunds received in error.
For more information, visit the Tax Benefits for Education Information Center on IRS.gov.
To avoid becoming ensnared in this scheme, the IRS says taxpayers should beware of any of the following:
• Fictitious claims for refunds or rebates based on false statements of entitlement to tax credits.
• Unfamiliar for-profit tax services selling refund and credit schemes to the membership of local churches.
• Internet solicitations that direct individuals to toll-free numbers and then solicit social security numbers.
• Homemade flyers and brochures implying credits or refunds are available without proof of eligibility.
• Offers of free money with no documentation required.
• Promises of refunds for “Low Income – No Documents Tax Returns.”
• Claims for the expired Economic Recovery Credit Program or for economic stimulus payments.
• Unsolicited offers to prepare a return and split the refund.
• Unfamiliar return preparation firms soliciting business from cities outside of the normal business or commuting area.
This refund scheme features many of the same warning signs that the IRS cautions taxpayers to watch for when choosing a tax preparer on the Tips for Choosing a Tax Return Preparer page on IRS.gov.
For additional information on tax scams, see the IRS’s annually updated 2012 Dirty Dozen list of the most prevalent tax scams.
- VAT Fraud Leads Father and Son Duo to Jail
- Mechanic Ordered to Pay Back £208k with Respect to a Tax Fraud
- Large Businesses Tax underpayments increases by 13% to £25bn
- OECD Releases Compliance Ratings on Tax Transparency
- LITRG urges to Act Fast on Missed Tax Credit Renewals
- Legal and Accounting Businesses Contribute £15.5bn in Taxes for UK Treasury
- Chinese Football Association Introduces Rule of 100% tax on Signings of Foreign Players