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‘Phishing,’ rebate scams top IRS ‘dirty dozen’ list

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in Small Business Tax

The IRS has issued its annual list of the “dirty dozen” tax scams for taxpayers to watch out for. (IRS News Release IR-2008-41)

Alert: At the top is “phishing,” which encompasses numerous Internet-based ploys for stealing financial information. New tax rebate scams are second. Here’s a quick rundown.

1. Phishing: Criminals use this tactic to obtain personal information that can be used to access the victims’ financial accounts.

2. Economic stimulus payments: Con artists trick individuals into revealing personal financial information by making promises relating to the new tax rebates.

3. Frivolous arguments: Promoters encourage taxpayers to make unreasonable and unfounded claims to avoid paying taxes legitimately owed.

4. Fuel tax credit scams: The IRS is receiving claims for the fuel tax credit that are unreasonable and unauthorized. The credit is limited to off-highway business use.

5. Hiding income offshore: Individuals continue to try to avoid paying taxes by illegally hiding income in offshore bank and brokerage accounts.

6. Abusive retirement plans: Abuses of the retirement plan arrangements include transactions used to avoid limits on Roth IRA contributions.

7. Zero wages: Filing a false wage- or income-related information return to replace a legitimate information return is an illegal method to lower tax.

8. False claims for refunds: This scam involves a request for abatement of previously assessed tax using Form 843, Claim for Refund and Request for Abatement.

9. Return preparer fraud: Dishonest preparers can skim a portion of their clients’ refunds and charge inflated fees for return preparation.

10. Disguised corporate ownership: Individuals form domestic shell corporations in certain states for the purpose of disguising ownership of a business or financial activity.

11. Misuse of trusts: Taxpayers are coerced into transferring assets to trusts by promises of tax reduction and increased deductions for personal expenses.

12. Abuse of charitable organizations and deductions: Misuse includes arrangements to improperly shield income or assets from taxation, attempts by donors to maintain control over donated assets and overvaluation of contributed property.

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