If you haven't filed your taxes yes, time is running out as April 15 is quickly approaching. Tax payers, beware of scammers on the prowl. The IRS has released its annual 'Dirty Dozen' list of tax scams that usually pop up during tax season.
1. Identity theft - One of the most common scams among thieves. It's getting easier for them to collect your name, social security number, birthdays and other personal information to fraudulently claim tax refunds in their own names.
2. Phishing - Scammers send e-mails pretending to be from the IRS. They can steal your identity and information if you reply. The IRS will never send e-mails, use social media or send texts to get personal information from you.
3. Fraudulent Tax Preparers - Make sure when you choose a preparer that he or she has an IRS Preparer Tax ID Number. Fake tax preparers who base fees on the size of your refund should also raise a red flag.
4. 4. Illegal Offshore Bank Accounts - Taxpayers who illegally hide income abroad can face huge penalties including a fine of $100,000 or 50 percent of account balance.
5. Promises of 'Free Money' - Be skeptical of advertisements that promise "free money" from the IRS. Victims could end up owing the IRS up to $5,000 penalty for making intentional errors on their return.
6. Bogus Charities - After disasters like Superstorm Sandy, Scammers will solicit donations for fake charities. If you give money, make sure you pay with a check or credit card instead of cash so you have proof of pavement.
7. Exaggerated Income and Expenses - You can get into big trouble with the IRS if you report higher income or expenses in order to qualify for bigger credits. You'll have to return your fraudulently collected refund and pay interest and penalties on any amount owed.
8. Refund Claims for Secret Government Accounts - Scammers will try to convince you to file a 1099-OID to collect money the federal government is allegedly holding in a secret account for U.S citizen. It's a common scam that could have you facing big fines and even jail time.
9. Frivolous Arguments - Filing a tax return is mandatory.
10. Pretending to Earn Zero Income - You can face a penalty of $5,000 if you fall for schemes that convince tax payers to file From 4852 ( a substitute W-2 form) or a corrected From 1099 in order to reduce their taxable income to zero.
11. Disguising Corporate Ownership - Firms that hide their identity by using third parties from the IRS underreport income, fail to file tax returns, claim false deductions and even launder money.
12. Misuse of Trusts - The IRS has seen an increasing number of people storing their money in private annuity and foreign trusts. These schemes will recommend you transfer money into to trusts to reduce your income and pay taxes. To avoid getting caught up in an illegal trust arrangement, the IRS recommends consulting with a tax professional.