It’s not a fun topic but it’s unfortunately a topic that we occasionally need to cover. Fraud and cyber crimes are on the rise, last year alone the IRS reported 370 cases of tax fraud. In this article we dive into some new tax schemes to look out for this year and how to report a suspected tax fraud case to the IRS.
*note: all information provided comes directly from the IRS and can be viewed on their website here.
Identifying Tax Schemes
There are a variety of scams out there and it can be difficult to identify a false letter from the IRS from a real one. The rise of scams is just one reason we recommend hiring a tax professional, that way if you receive anything suspicious from the IRS or other sources that claim you owe additional money or offer some tax credit you didn’t know about you can take that correspondence directly to your preparer. It’s their job, as a tax expert, to identify fraudulent documents and report them to the IRS. It’s important to understand, even when hiring a tax preparer you, as the taxpayer, are ultimately responsible for the information on your return and any penalties that may arise from fraudulent activities.
Reporting Tax Scheme
If you believe that you, someone you know, or a client are the victim or about to be the victim of a scheme then don’t hesitate to gather the information related to the scheme and report it to the IRS. This will allow them to investigate the scheme and alert other tax professionals of similar schemes that may be out there. Click here to view all your reporting options for a variety of tax scams.
W2 Filing Scam
The IRS has been made aware of a scam involving taxpayers and their W2 forms. The scam has been circulating on social media with individuals encouraging taxpayers to manually fill out Form W2 with false and inflated incomes while withholding other information, such as their employer’s name, in order to receive substantially larger refunds. This scam has a very low chance of success considering the IRS and state tax organizations will often verify payroll information and flag any suspicious or fraudulent activities. “We are seeing signs this scam is increasing, and we worry that innocent taxpayers could be at risk of being tempted into falling into a trap that puts them at risk of financial and criminal penalties,” said Acting IRS Commissioner Doug O’Donnell. There are variations to this scheme however the general outline is the same, creating false employers, employees, or entering false information into various tax forms in the hopes of getting a larger refund. The IRS is not known to take tax fraud lying down, just ask Al Capone, and a variety of penalties can and will be applied to the individuals to attempt this including fines and jail time. Remember there is no such thing as free money and if it sounds too good to be true it probably is.
It’s not a fun topic to discuss but it’s important, especially as a tax professional, to stay educated and vigilant for a variety of schemes they may try to take the hard-earned money, or even freedom, from a taxpayer. The greatest preventative measure you can take as a tax professional is to stay informed on the latest tax news and alerts. The best way to do this is by signing up to receive email alerts about our weekly blogs so you and your clients never become victims. Sign up today.
