The tax authorities have warned taxpayers of new scams this filing season involving tax refunds. Filers are always personally responsible for the information reported on their tax returns. And any improper tax refund claims could result in investigation and penalties.
While there is the temptation of succumbing to the lure of online scammers promising large tax refunds from reporting substantial withholdings and fictitious income, the price is too high. Filers who fall into this trap face criminal and financial cases if detected by the IRS.
Experts warn that there is an immense potential for offenders, deliberate or accidental, to be awarded hefty fines and other criminal charges. Making up deductions on income tax return shows criminal intent and will attract severe penalties experts warn. It can even lead to charges of fraud.
Potential Tax Refund Scams And Ways You Could Stay Away From Them
There is a lot of old and new way being used by professional tricksters to fool tax preparers and taxpayers alike. The income fake emails and phone calls. You as a taxpayer must protect your information and important documents to avoid tax scams.
There are temptations galore on the internet with deceptive tax preparers promising and even guaranteeing fat refunds. They file tax returns claiming deductions that you will not be entitled to take in return for a fat percentage. Such fake entries include bogus medical expenses, gifts, and sales tax.
In some cases, such fake tax preparers will induce you to file returns that include a false deduction for mortgage interest, even if you might not have a home. There are claims for itemized deductions that include mortgage interest. They bring in fat refunds of thousands of dollars but will attract criminal charges of fraud if detected by the tax authorities.
IRS has detected such tax prepares each of whom has resulted in the loss of millions in taxes owed to the IRS. Such tax preparers face prison time and are debarred from working in the profession ever again. And it can be equally dangerous for the filer who gets caught up in the false promises of such scammers.
Experts exhort that taxpayers must be eternally vigilant while filing their returns and take a personal interest in the entries. They should double-check the work of the tax preparer just to make sure that the promised tax refund is not too good to be true and is the result of false and fraudulent entries.
IRS Have Cited Cases Of Plenty Of Fraud Tax Refund Schemes
The tax agency has cited many such instances of investigations that have led to prosecution and sentences for tax preparation abuse and fraud. In March a man in North Carolina pleaded guilty to submitting false income tax refunds to inflate tax refund checks of his clients.
Even if as a taxpayer you are not found complicit in the crime, it is not an easy road if you find yourself at odds with the IRS and have to prove your innocence. Paying back tax refunds or worse penalties is not easy, and is something that no honest taxpayer should have to go through. It is a long and hectic process and can leave you in financial ruin.
Red Flags To Identify Preparers Who File Fraudulent Tax Refunds Claims
Any person who assists you in preparing income tax returns must have a valid preparers identity, called the preparer tax identification number (PTIN), revealed by the IRS. Not affixing their signature to income tax returns should be a sure red flag. It is an indication that the paid tax preparer is out to lure you with promises of fat returns and make a fast buck on the sidelines.
Even certified preparers who do not sign on your returns may be trying to absolve themselves of any crime they may be committing in filing the returns. It is a sure sign that the tax preparer is not willing to reveal to the agency that he is part of the return.
If you detect such instances, you should immediately get rid of such tax preparers. That person may even have plans to alter your income tax returns before finally filing them electronically.
You can check if your tax preparer is legit by going to the website, irs.gov and searching Directory of Federal Tax Return Preparers.
Do Not Let The Promise Of A Tax Refund Prompt You To Sign On Blank Or Partially Filled-Out Returns
While filing returns seems like an endless round of signings, make it a practice never to sign your return on blank papers or partially signed papers and accept your tax preparer’s assurance that he will fill in the rest of the details later.
No matter who is preparing your taxes, ultimately the onus is on you at the end of the day. It doesn’t matter if it is a large tax software company or an accountant that you have trusted for years. Be sure to always request a copy of the tax return duly signed by the tax preparer before you walk out of his office.
Even if it is an electronic return, get a copy of the filing and ask for evidence that it has been submitted.
One of the agreements that prepare the ground for fabricated tax refund claims is giving a preparer a percentage of your tax return. That could turn out to be a surefire way to tempt them to claim false credits or deductions or inflate the actual expenses.
And if at the end of the day, you get caught, it is you, and not the tax preparer, who will be responsible for paying the money back along with fines and penalties. You would also be the one facing criminal charges if any. There is also the chance of you incurring a 20% accuracy-related penalty. This penalty is assessed if you have underpaid the tax amount you owe.
A huge sign of warning is when your tax preparer promises a large refund in advance without going through your papers. That is something he cannot guarantee without even going through your tax situation. Another red flag is when the preparer wants you to instruct the IRS to deposit your tax refund amount in a different bank account. This is a sure sign that they intend to manipulate your return, claim a larger tax refund, and transfer the actual to you.