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The IRS has given us time and now a "Dirty Dozen" list

By Dian Vujovich

The IRS cares about us. Really. In addition to a two-day filing date extension for everyone—the deadline is Tuesday, April 17th—they’ve just announced their annual “Dirty Dozen” common tax scams alerting us to what to watch out for. Now that’s love.

So with about two months left to go before that April deadline—BTW we got the extension because the 15th fell on a Sunday and Monday was a DC holiday—below are the 12 scams our revenue service wants all 144 million individuals who file taxes to be aware of. (If you’re one of the many who have already filed hope none impacts you.):

The Dirty Dozen tax scams for 2012:

-Topping the list: Identify theft.” The IRS has stepped up its internal reviews to spot false tax returns…. and is working to help victims of the identity theft…In 2011, the IRS protected more than $1.4 billion of taxpayer funds from getting into the wrong hands due to identity theft….”

-Phishing. To avoid this, be aware of unsolicited email or fake websites that look good but ask for valuable personal and financial information. If you’ve received those kinds of emails or visited sites promising money provided you give them info, report the site and the emails to phishing@irs.gov.

-Return Preparer Fraud. This year, the IRS says 60 percent of filers will use a tax professional to prepare their returns. And in 2012, every paid preparer needs to have a Preparer Tax Identification Number (PTIN) plus must enter it on the returns he or she prepares. Make sure you see that number in its proper spot before signing or leaving the tax preparer’s office.

-Hiding Income Offshore. Having an offshore account is one thing. Hiding it is quite another. So, as long as you follow the rules and pay the appropriate amount of tax due on such an account, the long arm of The Uncle won’t reach out for you.

“This year, the IRS reopened the Offshore Voluntary Disclosure Program (OVDP) following continued strong interest from taxpayers and tax practitioners after the closure of the 2011 and 2009 programs… The IRS has collected $3.4 billion so far from people who participated in the 2009 offshore program…and has collected an additional $1 billion from up front payments required under the 2011 program…”

-“Free Money” from the IRS & Tax Scams Involving Social Security. By now we all ought to know that there is no such thing as “free money.” If anyone tries to get you to believe otherwise, notify the authorities.

-False/Inflated Income and Expenses. This includes income that was never earned or expenses listed that are fake. It’s a no-no. But you already knew that, too.

-False Form 1099 Refund Claims. “In this ongoing scam, the perpetrator files a fake information return, such as a Form 1099 Original Issue Discount (OID), to justify a false refund claim on a corresponding tax return. …Don’t fall prey to people who encourage you to claim deductions or credits to which you are not entitled or willingly allow others to use your information to file false returns. If you are a party to such schemes, you could be liable for financial penalties or even face criminal prosecution.”

-Frivolous Arguments. To read about some of these tried-but-failed arguments, visit the link provided at the end of this piece.

-Falsely Claiming Zero Wages. A no-brainer that by doing so could result in a $5000 penalty.

-Abuse of Charitable Organizations and Deductions. In case you have forgotten, “The Pension Protection Act of 2006 imposed increased penalties for inaccurate appraisals and set new standards for qualified appraisals.”

-Disguised Corporate Ownership. In this instance, third parties improperly use and request employer identification numbers to form corporations that obscure the true ownership of the business.

-Misuse of Trusts. Trusts may have a place in tax and estate planning, just not always. “IRS personnel have seen an increase in the improper use of private annuity trusts and foreign trusts to shift income and deduct personal expenses. As with other arrangements, taxpayers should seek the advice of a trusted professional before entering a trust arrangement…”

More details at:www.irs.gov/newsroom/article/0,,id=254383,00.html.

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