The Internal Revenue Service (IRS) recently released its top-12 list of tax scams to watch for in the current tax year, an annual list called the "Dirty Dozen." Topping the list in 2018 are the perennial telephone and phishing scams, identity theft, and return preparer fraud. Also included are acts such as falsely padding deductions, making improper claims for business credits, and falsifying income. For the complete list and information from the IRS on how to protect yourself from tax scams, click here.
The Internal Revenue Service (IRS) kicked off its annual "Dirty Dozen" awareness campaign about common tax scams for 2018 with a reminder that phishing schemes are still a serious threat to personal information safety, and are evolving. The most recent variation on phishing (previously described here) involves an unexpected deposit into the bank account of a target. Criminals are filing fraudulent tax returns, and directing refunds to be deposited into real bank accounts of victims. The criminals then call the victim who received the deposit and demand the return of the funds as erroneous.
The California Tax Education Council (CTEC) began a public awareness campaign for the 2018 tax filing season targeting "ghost tax preparers," meaning paid tax professionals who do not sign the returns they prepare. The Council reminds taxpayers that "tax preparers who charge a fee to do your taxes, but never sign your tax return are breaking the law." Hiring a ghost preparer could lead to tax refund fraud, penalties, or additional taxes. For more information from CTEC on this issue, click here.
The Internal Revenue Service (IRS) recently released the fiscal year 2017 annual report for its Criminal Investigation Division (CI). During FY 2017, CI initiated over 3,000 cases concerning Title 18 and Title 31 crimes, with 72.5% of its investigation time spent on tax matters such as refund fraud, identity theft, abusive tax schemes, and cyber crimes. Its investigations identified $2.5 billion in funds related to tax fraud, and the division had a 91.5% overall conviction rate.
Susanne D. Rüegg Meier, a citizen and resident of Switzerland, pleaded guilty on July 19, 2017, to conspiring with U.S. taxpayers and other Swiss bankers to defraud the United States as the head of a team of bankers for Credit Suisse AG between 2002 and 2011. She was responsible for the accounts of over 1,000 clients and handled approximately $400 million in assets. Her conduct led to an estimated U.S. tax loss of between $3.5 and $9.5 million. Sentencing in this case is scheduled for early September 2017; Rüegg Meier faces a maximum of five years in prison, a period of supervised release, and restitution penalties.
The IRS has begun releasing detailed notices on the top 12 most common tax scams taxpayers may encounter during the 2017 filing season. Included so far are:
The IRS Security Summit issued a warning to tax professionals about a new e-mail scam by cybercriminals posing as potential clients. Scammers are sending phishing e-mails in two parts, beginning with a standard solicitation for services followed by a second email with an embedded web address or PDF attachment with an embedded web address. When the tax professional thinks they are accessing a new client's tax information, in reality they are opening up their system for the scammer to collect personal information for illegitimate use.
The IRS and its Security Summit partners finalized plans on November 3, 2016, to improve identity theft protections in 2017 after the significant success of its 2016 program (and in spite of a growing number of scams). In the first nine months of the current year, identity theft victim claims dropped 50 percent, as compared to 2015. The number of fraudulent returns stopped by the IRS' tax processing systems increased, derailing 787,000 attempts at identity theft return filing, and stopping nearly $600 million more in fraudulent refunds from being paid out to scammers as compared to the previous year.
The Treasury Inspector General for Tax Administration (TIGTA) recently released a report that found nearly $9 billion in backup withholding tax was not withheld for 2013 information returns with missing or incorrect taxpayer identification numbers. The IRS should have received nearly $5 billion in backup withholding for payments to these unidentified payees, but payers withheld only $1 million.
Darryl Genis, a 60-year-old DUI attorney practicing in Santa Barbara County, California, pled guilty recently to three counts of willfully failing to file tax returns between 2009 and 2011, and admitted to willfully failing to pay taxes for the same years, totaling nearly $680,000. He also admitted to underpaying taxes for the years 2005 through 2012. Genis agreed to pay civil penalties for all years at issue, and he faces up to three years of imprisonment.