5 Tax Scams of 2013

1. Don’t let others go phish. Phishing is a way for individuals to steal Social Security numbers and file fake tax returns in order to receive fraudulent tax refund checks. Social Security numbers can be stolen from unsuspecting persons who receive authentic-looking IRS, bank, or credit card company emails requesting confirmation of these personal details, however these emails are fake.

2. Identity theft.  According to recent research, approximately 300,000 people in North Carolina are victims of identity theft each year. Phishing is one means of committing identify theft. Dishonest tax preparers and anyone who has had access to your Social Security number has enough information to cause serious damage to your credit file. Scammers are also using information that individuals voluntarily include in their social media profiles, including dates of birth, and the answers to common security questions like names of pets. North Carolina identity theft victims should file a police report immediately in the town where a fraudulent action took place. The next steps are to close compromised accounts and report the activity to all three credit bureaus as well as the Federal Trade Commission. When it comes to your taxes and someone else has already submitted a return and collected a fraudulent refund in your name, you will need to contact the IRS directly.

3. IRS “free money” offers. Flyers or ads that promise money from the IRS at no cost are usually created by individuals who prey on the elderly. Those with fixed or low-incomes are attracted to these flyers and unknowingly make fake tax claims. Innocent people pay the scammers to file their tax forms. By the time a rejection notice arrives, the scammers are no longer available to contact.

4. Misuse of trusts. Trusts are excellent asset protection tools—when used appropriately. However, statistics from the IRS show a boost in the misuse of foreign trusts. Work with an established asset protection attorney to create and review trusts to ensure they are structured according to the latest guidelines. Offshore trusts offer asset protection from creditor claims. Some individuals choose to use offshore trusts to “hide” income in order to evade tax requirements—this is illegal. If a tax advisor suggests you use foreign trusts this way, they are misleading you. You ultimately hold legal responsibility for the information on your tax return. There are still necessary forms to file and domestic taxes to be paid on offshore accounts. Failing to submit reports may result in penalties and fines.

5. Keep a watchful eye over elderly relatives who may fall prey to the above scams. North Carolina elder law attorneys help individuals and families structure assets, but a senior citizen’s accounts could become compromised if they click on a phishing email or sign an agreement with a scammer. Of course, the elderly are not the only ones at risk. American taxpayers at any age are vulnerable to tax scams to some degree. Avoid any programs that resemble the scams above. Stay updated each year with new tax scam information as technology advances and creates more opportunities for scammers.