taxes

Beware the dirty dozen tax scams of 2014

Taxes » Tax Law » Beware The Dirty Dozen Tax Scams Of 2014

False income, expenses, exemptions
False income, expenses or exemptions © docent/Shutterstock.com

Most tax cheats report less income than they make, so their tax liability will be less. But in some cases, a taxpayer needs more money to get a tax break's maximum benefit.

The IRS says it regularly sees fraudulent income inflating by individuals seeking a refundable tax credit, such as the earned income tax credit, for which they otherwise don't qualify.

Credits prompt such unscrupulous acts because they are better tax breaks than deductions. A deduction lowers taxable income, while a credit lowers the actual tax bill dollar for dollar. Refundable credits, as the name indicates, allows filers who don't owe tax to get a refund.

Other tax con artists file excessive claims for relatively uncommon tax breaks, such as the fuel tax credit. This is designed to help farmers and similarly situated taxpayers who use fuel for off-highway business purposes.

The key to avoid this eighth most common 2014 tax scam is to accurately report your taxable income and expenses. If you don't, you could face interest on unpaid taxes, penalties that could be as much as $5,000 and possible criminal prosecution.

 

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