June 2012

June 2012

El Sobrante Chamber of Commerce Mixer

Wednesday, June 13, 2012 5:00PM-7:00PM Please join us to celebrate our newest business in El Sobrante J.L. Brown Event Boutique 3820 San Pablo Dam Rd. Suite B El Sobrante, CA 94803

Top 12 Tax Scams: IRS' Dirty Dozen

As if it isn't difficult enough making sure that you have all the necessary information and forms available to put together this year's tax returns, the IRS warns that there are other concerns you should have in addition to missing data. Each year it puts together a list of the top tax scams that can bedevil taxpayers at any time of the year. Scammers, the IRS counsels, shift into high gear in tax season, when departures from the norm may be less likely to be noticed. Such scams can present themselves in person, via email or online, and lure people with promises of too-good-to-be-true tax refunds or free money. The IRS isn't kidding about these, and will prosecute whoever they catch perpetrating them. 1. Who Are You Again?Identity Theft If you get a notice from the IRS that you submitted more than one return, when you know perfectly well you had enough trouble filling out one, you may have been a victim of identity theft. Did the IRS ask you about an employer you never worked for? Fraudsters who steal your identity may also have designs on a refundany refund, and will file a false tax form to get itor to create one that they can spend while you're trying to explain yourself to the IRS. If this sounds like what happened to you, the IRS recommends you immediately contact the IRS Identity Protection Specialized Unit. Check out www.IRS.gov/identitytheft for more information. 2. Gone Phishin' Get an email from the IRS wanting more information aboutwell, about anything? Guess again. The IRS does not initiate contact with taxpayers by email to request personal or financial information," its website says. "This includes any type of electronic communication, such as text messages and social media channels. It also warns that emails from other agencies, such as the Electronic Federal Tax Payment System, are bogus too, and an attempt to get you to disclose valuable personal and financial information. Got one? Report itsend it to phishing@irs.gov. 3. But I Trusted You!Return Preparer Fraud Any barrel will have some bad apples, and that includes tax preparers. If you don't want to end up in the sauce, watch out for a preparer who doesn't sign your return, charges a percentage of your refund, doesn't seem to have or use a Preparer Tax Identification Number, or encourages you to indulge in the IRS version of a liar loan by putting down false information. 4. Beyond the Sea Hiding Income Offshore While it may seem cool to have a Cayman Islands bank account where you can funnel income so it won't be taxed, or a secret Swiss bank account to help pay for those skiing jaunts to St. Moritz, you may have noticed some headlines recently that imply otherwise. The IRS is onto the secret, and moving money to avoid taxes is not only illegal, it's very traceable. 5. Boosting the NumbersFalse/Inflated Income and Expenses The IRS also warns against being encouraged to claim income and/or expenses that don't exist so that refundable credits will be bigger. Not only could you be on the hook for penalties and interest, you could also be prosecuted. The fuel tax credit is another potential problem. If you're a farmer or someone else who really uses fuel for offhighway purposes, that's finebut the IRS warns that lots of other people whose professions have no relation to this use are trying to claim the credit as well. 6. Pay Might Be Low, but This Is RidiculousZero Wages If you falsely claim zero wages you could be in for big trouble. The IRS says some will resort to using a Form 4852 (Substitute Form W-2) or a corrected Form 1099 to improperly reduce taxable income to zeroand they may even include a statement rebutting wages and taxes reported by a payer to the IRS, or an explanation. 7. But I Saw It in Church!Offers of Free Money According to the IRS, flyers promising taxpayers the way to get free money from the agency are turning up all over the countryin churches, no less, and via word of mouth from otherwise trusted (but misguided) friends and even family. These dastardly documents also promise Social Security refunds that don't exist. The folks behind them charge a fee (of course) to put their schemes in place for you, then disappear and leave you to face the music. And it doesn't sound pretty. Don't fall for it. It can cost youespecially since the IRS charges a $5,000 penalty for taking part in these schemes knowingly.

8. Yeah, I Don't Need to Pay Taxes Some scammers will encourage taxpayers to make frivolous arguments some of which have already been tossed out of court, such as the notion that paying taxes is voluntaryin an effort to get out of paying taxes. Before you decide to try an argument that surely no one has considered before, check these outor you could find yourself tossed out with it. 9. False Documents, Secret AccountsOh, Wait, This Isn't Espionage Some scammers advocate that people file returns based on false documents, such as a Form 1099 Original Issue Discount, so they can claim refunds they shouldn't be getting. There's also another urban myth-type belief that the federal government maintains secret accounts for U.S. citizens and that taxpayers can gain access to the accounts by issuing 1099-OID forms to the IRS. 10. Gifts That Keep on GivingCharitable Gifts and Donations If several different charitable organizations claim the same non-cash assets as donations, or if a 501(c)(3) organization is intentionally abused via schemes to protect income or assets from taxation, the IRS is wise to that. These are just some of the ways in which charities can be manipulated for gain, and that's not very generous. 11. Hiding Behind a CorporationDisguised Corporate Ownership Money laundering, underreported income and other devious strategies can accompany efforts to hide the true ownership of a corporation. Don't be sucked in. 12. A Matter of TrustMisuse, That Is While there are plenty of legitimate purposes for trusts, there are also plenty of schemes involving them. Attempts to cut taxes in illegal ways, write off deductions via a trust that wouldn't work for an individual and cut estate or gift taxes are just some of the ploys involving the use of a trust. But the IRS is watching. If you need help understanding any of these tax scams or any other financial or retirement planning or investing ideas, please contact Bob Davis at DAVIS INVESTMENT GROUP at (707)648-2024.

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