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Beware these 'dirty dozen' tax scams that can cost you big and even land you in jail

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Falsely padding deductions
Falsely padding deductions | Flashpop/Getty Images

Falsely padding deductions

The IRS warns against falsely inflating deductions or expenses on tax returns.

While doing this can result in a lower tax bill or a bigger refund than is due, the risk isn't worth the reward. But because each year some taxpayers "fudge" this information, it remains on the IRS' dirty dozen tax scams list for the second consecutive year.

Some taxpayers overstate their charitable deductions, pad their business expenses or claim credits to which they're not entitled, such as the earned income tax credit or the child tax credit. If your tax preparer is suggesting that you do this, resist the temptation.

The IRS has been streamlining its increasingly efficient automated systems to detect this type of fraud, generating the dreaded tax audit. If a return is found to be erroneous, taxpayers may be subject to stiff fines and penalties. They include all taxes owed plus 20 percent of the disallowed deduction amount, and an additional 75 percent of the amount owed if the underpayment on the return resulted in tax fraud.

The best defense is to file an accurate return.

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