Tax Scams to Avoid This Tax Season

Hidden Offshore Accounts. Regulation changes over the past year have altered the ways individuals with foreign accounts and trusts must report assets to the IRS. Foreign trusts, when structured properly, are legal tools that help many Americans protect assets against creditors’ claims. However, some tax schemes have developed that operate under the guise that they help persons with foreign accounts manage their finances. These schemes may not properly declare foreign trusts and accounts, which leaves the foreign account owner vulnerable to investigations of tax evasion for their “hidden offshore accounts,” failure to comply, and may face criminal charges, fines, and/or penalties. The Senate recently found Credit Suisse guilty of helping American taxpayers hide foreign funds by providing fake visas and other illegal methods. (For individuals who intentionally attempt to use offshore accounts to hide funds and income, the IRS offers the Offshore Voluntary Disclosure Program. This allows guilty persons to come forward and offers lesser penalties to taxpayers who disclose their foreign accounts.)

Tax Preparation Scams. According to the IRS, “taxpayers are legally responsible for what’s on their tax return even if it is prepared by someone else.” Finding a legitimate tax preparation service is critical—but even longstanding professionals could be scamming taxpayers. Just six years ago, a professional North Carolina tax return preparer (who had been operating for about 18 years), was sentenced to almost 6 years in prison and ordered to pay $6M in restitution. The preparer was filing false tax returns and received fake refunds using his clients’ information, accumulating over 10,000 fraudulent returns.

Typical Tax Fraud. Don’t forget: Phishing, phone scams, and identity theft happen in and out of tax season. Fake emails and impersonating callers may try to acquire personal information like Social Security Numbers, account numbers, and more. Never provide personal information via email or over the phone unless you have initiated the call and have verified the number.