The IRS has just released its 2015 Dirty Dozen tax scams. With its budget being cut to record lows, the IRS has to focus on getting the biggest bang for its effort. With everything being digital, it is very easy for the IRS technology department to write computer programs that can sniff out likely tax fraud and issue letters demanding proof of income/expenses—all without any human eyeballs looking at anything or talking to anyone.
High on the list…Return Preparer Fraud. This is when your tax account prepares your return and puts down, either with your knowledge or without your knowledge, false expenses and false credits so that you don’t owe as much and so you keep coming back. I just handled a two-year audit (we were lucky it didn’t go to three), for a new client that was a high end professional whose tax accountant was writing off a flat $60,000 in business expenses every year. BUSTED. With returns being efiled and not hand-signed, it is easy not to really look at your return. This professional ended up owing some money to the IRS every year, so the professional figured it all was on the up and up. Another tax payer was nailed for multiple years for claiming energy credits. Both of these folks had one thing in common---they didn’t ask for the cheats and they didn’t mind and could afford to pay the tax (of course, no one wants to).
Another on the IRS’ Dirty Dozen List—Inflating Refund Claims. If this is you, STOP IT. You are on the radar. This could include claiming energy credits, education credits, and the like or it could mean claiming a false Business to take false losses by writing in false expenses like paying rent for office space (a classic no no). As noted above, make sure your tax accountant isn’t just “slipping” them in to make you love them because you receive a higher refund or lower amount due. Remember, the IRS offers payment plans. The interest and penalties suck, but you can get through this in the short term. But if you are busted over multiple years, the penalties are huge and the interest on the penalties is “huger”. Except your real refund such that it may be and/or come up with a plan to pay off what you owe to avoid an uglier situation that may occur downstream.
High on the list…Return Preparer Fraud. This is when your tax account prepares your return and puts down, either with your knowledge or without your knowledge, false expenses and false credits so that you don’t owe as much and so you keep coming back. I just handled a two-year audit (we were lucky it didn’t go to three), for a new client that was a high end professional whose tax accountant was writing off a flat $60,000 in business expenses every year. BUSTED. With returns being efiled and not hand-signed, it is easy not to really look at your return. This professional ended up owing some money to the IRS every year, so the professional figured it all was on the up and up. Another tax payer was nailed for multiple years for claiming energy credits. Both of these folks had one thing in common---they didn’t ask for the cheats and they didn’t mind and could afford to pay the tax (of course, no one wants to).
Another on the IRS’ Dirty Dozen List—Inflating Refund Claims. If this is you, STOP IT. You are on the radar. This could include claiming energy credits, education credits, and the like or it could mean claiming a false Business to take false losses by writing in false expenses like paying rent for office space (a classic no no). As noted above, make sure your tax accountant isn’t just “slipping” them in to make you love them because you receive a higher refund or lower amount due. Remember, the IRS offers payment plans. The interest and penalties suck, but you can get through this in the short term. But if you are busted over multiple years, the penalties are huge and the interest on the penalties is “huger”. Except your real refund such that it may be and/or come up with a plan to pay off what you owe to avoid an uglier situation that may occur downstream.
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