Don’t give money to anyone who promises to get you a tax refund or credit for slavery reparations, Social Security taxes, disabled access to pay telephones or any of the other scams that flourish during the tax-filing season. Here are some of the most common schemes:
Special tax refund for descendants of slaves. Unscrupulous promoters persuade victims to pay them to prepare a slavery reparations claim. The tax code has no such provision.
No tax withheld from wages. Schemes to get employers not to withhold federal income or employment taxes from wages are illegal.
Pay taxes, win a prize. Typically, a caller says you’ve won a prize and only have to pay the income tax due on it. If you’ve really won a prize, you may need to make an estimated tax payment to cover the taxes that will be due at the end of the year, but the payment goes to the IRS, not to the caller. A legitimate prize giver sends you a 1099 form showing you the total prize value that should be reported on your tax return.
“Untax” yourself. Internet advertisements may say that paying taxes is “voluntary,” but that’s not true. Don’t buy in to these “untax packages.”
Social Security refund. If you’re offered refunds for Social Security taxes paid during your lifetime, don’t be fooled. The law doesn’t allow such a refund. The scam artist usually asks victims to pay a “paperwork” fee of $100, plus a percentage of the anticipated refund, to file a refund claim with the IRS.
Get a big refund for free. Con artists may ask to “borrow” your Social Security number or offer to give you a phony W-2 to make it look as if you qualify for a big refund. They may promise to split the refund with you. Don’t sign a tax return without looking it over to make sure it’s correct (and honest).
Earned income credit.
Unscrupulous tax preparers “share” one client’s qualifying children with another client in order to allow both clients to claim the earned income tax credit.
The IRS comes to your house to “collect.” Don’t let anyone into your home unless they have identification. IRS special agents, auditors and collections officers carry photo IDs and will normally try to contact you before they visit. If you think the person at your door is an impostor, lock the door and call police. Then call the Treasury Inspector General’s hotline at 800-366-4484.
Put your money into a trust and never pay taxes again. Promoters of abusive trust schemes may charge thousands of dollars for “trust” packages that purport to let taxpayers control their assets and avoid taxes. A legitimate trust puts assets beyond a person’s ability to benefit from them. Many people set up a “living trust” to provide for easier transfer of assets upon death, but there’s no income tax benefit. The person still pays taxes as though the assets were personally owned.
Improper home-based business. This scheme offers tax “relief,” but is in reality a way to illegally avoid taxes. Promoters claim that taxpayers can deduct most or all of their personal expenses as business expenses by setting up a bogus home-based business.
Disabled access credit for pay phones. Scam artists sell expensive coin-operated pay phones to people, persuading them that they can claim a $5,000 disabled access credit on their tax return because the phones have volume controls. The disabled access credit is limited to legitimate businesses complying with the Americans with Disabilities Act.
If you encounter anything that looks like an unscrupulous tax scheme, call the IRS at 800-829-0433, or contact the agency on the Web at http://www.irs.gov.