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Dirty dozen tax scams

By Kay Bell ·
Friday, April 8, 2011
Posted: 1 pm ET

Yes, the tax filing deadline is close. But don't get in such a panic that you fall victim to a tax scam.

To make sure we all avoid this season's most prevalent cons, the Internal Revenue Service has released its annual "Dirty Dozen" tax scam list.

These 12 scams could cost you more than you expect. Not only could you lose your money and personal data to criminals, but if a scam causes you to misreport or under-report your income or take a tax break that's not legal, you'll also end up owing the IRS. That means the taxes you should have paid and probably some interest and penalty fees, too.

This year's worst tax scam list includes phishing schemes from identity thieves, fraud perpetrated by tax pros (yes, there are unscrupulous ones), hiding income in an offshore (in IRS-speak, that means foreign) account, false or misleading tax forms and exaggerated charitable donation claims.

And, of course, there are scams that try to convince folks that federal income taxes are illegal. The IRS has a word for these: frivolous.

A common frivolous tax argument is the contention that wages, tips and other compensation received for personal services are not income, because there is allegedly no taxable gain when a person "exchanges" labor for money. What's taxable or not is a settled argument and wages count. It is called an income tax.

And we can't forget the contention that the filing of a return is voluntary. Wrong. The IRS depends on taxpayers' voluntary compliance with the law, meaning the agency asks us to file rather than doing it for us. But the filing itself is legally required.

That argument didn't work for Wesley Snipes. It won't work for you.

Get the latest tax news and tips to make your final days of filing easier (and scam-free) by subscribing to the free Daily Tax Tip newsletter.

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1 Comment
April 09, 2011 at 11:33 pm

Can anyone tell me where I can get a loan on rental property that I own free and clear?