Have you received emails from the “IRS Office of Professional Responsibility”?  If you have, you should know that these emails are most likely part of a “phishing” scheme that tries to get your personal information.  The subject line of this email is “Acquire new EIN” (or some variation) and the email itself instructs the addressee to obtain a new Employer Identification Number (EIN) by clicking on a link and providing personal information.

“Phishing” is a scam that is usually done by sending out unsolicited email to get unsuspecting victims to provide personal and financial information.

You should know that the IRS does not initiate contact with taxpayers by email to request personal or financial information. The IRS also does not request personal information through email or ask for PIN numbers, passwords, credit card information or bank information. If you receive an email from someone who claims to be the IRS, do not click on any links provided or respond to these emails.

If you receive a “phishing” email like the one described above, or any other email from someone who claims to be the IRS and asks for personal information, please report it to phishing@irs.gov.

Daniel Stoica Accounting Professional

The IRS has stated that one of their highest rates of tax return fraud comes from prisoners. In 2009 alone, prisoners got away with taking more that $39 million in phony refunds. Georgia, Florida and California had more that $19 million in fraudulent refunds. These 2009 figures are more than 3 times the amount prisoners claimed in fraudulent refunds in 2008.

How the Prisoners Execute the Fraud

Prisoners do not make enough to qualify to file a tax return, but some do have money from inheritances, business income, investment income, rental income, and other types of income. They must file tax returns on this income, but that often leads to many fraudulent returns being filed by the prisoners. The maximum penalty for tax fraud is imprisonment, so that’s probably not much of a deterrent for many who are already incarcerated.

Prisoners have found ways to hack into IRS databases and obtain Social Security numbers from unsuspecting taxpayers. They then use these social security numbers to file fraudulent tax returns and claim refunds. They have also been known to claim refunds on bankrupt companies. Once again, they find ways to hack into the database to look up lists of bankrupt companies and claim phony refunds under their names. They often make the tax returns look so genuine that the IRS doesn’t question them. Once they prisoner receives the refund, they enlist the help of friends or family members and have them cash the refund checks. The Treasury Inspector General for Tax Administration stated that the IRS needs to take action against this immediately.

Action against Prison Fraud

The IRS and lawmakers have taken strides to try to put a stop to these fraudulent tax returns. In 2008, a law was passed to make sure the IRS releases prisoner tax information to the Federal Bureau of Prisoners and other Federal and State Corrections departments. This law was put in place to help authorities keep track of tax returns filed by prisoners and keep them from filing false returns. Authorities are still in the process of reviewing the law to make it better so that confidential taxpayer information isn’t leaked. Until the entire system is stable, prisoners may be able to continue to get away with filing fraudulent tax returns and claiming refunds that belong to law abiding taxpayers.

Daniel Stoica Accounting Professional

The IRS is asking taxpayers to protect themselves against individuals who claim to be from the Internal Revenue Service and try to get them to file false claims for tax credits and/or rebates.

There has recently been an increase in tax scams which involve taxpayers who don’t normally have to file a return. They are scammed into believing that they need to file a tax return to get credits, refunds or rebates. These scammers have been targeting individuals in the South and the Midwest.

Most tax preparers are honest, but there are some who try fraudulent tactics to get more money from individuals. These people are deceitful and attempt to get taxpayers to pay for their advice on filing false claims. They charge outrageous amounts of money to prepare returns that the IRS will prepare for free or by the IRS’s Volunteer Income Tax Assistance program. In some cases, identity theft is involved. 

The IRS suggests that taxpayers be on the look-out for:

-False claims for refunds or rebates for Social Security benefits.

-1080 Form fraud that claims funds can be transferred from the Social Security Administration to the IRS.

-Unknown tax services that claim to be part of local churches.

-Poorly made flyers and brochures claiming credits and refunds without proof of eligibility.

-Claims of money with no required documentation.

-Claims of no document tax returns with the promise of a refund.

-Promising money from expired Economic Recovery Credit Program or Recovery Rebate Credits.

-Claims of receiving the Earned Income Tax Credit with incorrect self-employment income.

Social Security refunds and rebates have been used by these scammers. There are some taxpayers who qualify for these rebates or refunds, but the preparer uses fictitious information on the tax return, resulting in a fraudulent return.

Flyers and brochures have been floating around many churches,  claiming a taxpayer can receive free money from the IRS with little or no documentation. These scammers have been targeting church congregations and ruining their reputations and credibility. The scammers are able to keep getting away with it by their victims telling friends and family that it is legitimate because they haven’t been contacted by the IRS about it yet.

These scammers generally target low-income taxpayers and the elderly.

They convince their victims that this refund or rebate is legitimate and charge them large sums of money for their “services”. But, in the end, the victim finds out that their claim has been rejected or, if they are lucky enough to get a refund, it isn’t even enough to cover the cost the scammer has charged them. By that time, the scammer is long gone with their money.

The IRS is warning taxpayers and people who assist with preparing taxes, to stay aware of what is going on. If it sounds too good to be true, it probably is.

If you have questions about the tax credits and wonder if you actually qualify, or if you feel you have been a victim of one of these tax scams, visit www.irs.gov or call the IRS at 1-800-829-1040. You can even visit your local IRS Taxpayer Assistance Center or contact a tax professional. 

Daniel Stoica Accounting Professional

Even though the federal tax season ended on April 18, the IRS is still receiving information about tax scams. Two new scams are targeting the families of Military personnel and many e-mail users. In both cases, the perpetrators are posing as employees of the IRS.

The IRS has seen several cases of scams that targets the families of Military personnel.

The IRS wants taxpayers to be aware of the first scenario where a telephone caller, posing as an IRS employee, claims that the taxpayer is entitled to a  refund because their relative is in the Military. They then proceed to request a credit card number in order to cover the postage fee. The scammer gives the actual IRS toll-free number to make the call seem legitimate. Once the scammers have the credit card number, they make countless purchases with the victim’s information.

When actual IRS employees call taxpayers, they will NEVER ask for credit card numbers or request fees for anything.

These types of scams have been going on for years and, sadly, many people still fall prey to them and, before they know it, thousands have been charged to their credit cards. The IRS asks that taxpayers remember that they do not charge for refunds or ask for credit card information.”

In the other scam, victims get an e-mail that looks like it’s from the IRS. The e-mail provides links to a non-IRS web page which requests personal and financial information. The information is then used to steal your identity and gain access to your sensitive financial data.

Identity thieves use your personal data to:

-Take over your financial accounts,

-Make purchases on your existing credit cards,

-Apply for loans, credit cards, services or benefits in your name, and

-File fraudulent tax returns.

The IRS will NEVER ask for your personal or financial data via e-mail.

Both of these scams are under review by the Treasury Inspector General for Tax Administration. They are currently investigating the abuse of the IRS name, insignia, seals, and symbols.

Taxpayers who believe they have been scammed need to contact TIGTA by calling their toll-free fraud referral hotline at 1-800-366-4484, or by faxing a complaint to 202-927-7018. You can also write the TIGTA Hotline at: P.O. Box 589, Ben Franklin Station, Washington, D.C. 20044-0589.

These are not the first scams that involve scammers who impersonate IRS employees, nor they will be the last. However, the IRS is working diligently to put a stop to them.

These thieves have impersonated IRS agents in the past by even showing up at a taxpayers’ home,  claiming to collect taxes. Genuine IRS agents and collection officers will produce a picture ID and will contact the taxpayer before they visit.  In another scam, the con artists send out false bank correspondence and phony IRS forms in order to trick the taxpayer into giving them their personal and financial information. These thieves then use this information to pose as the taxpayer to gain access to the their finances.

If you ever have questions about your correspondence with the IRS, either by phone, email or postal mail, please contact the IRS or a qualified tax professional right away. 

Daniel Stoica Accounting Professional

The Internal Revenue Service has announced that a voluntary disclosure initiative has been implemented that is designed to bring money that is held offshore back to the U.S., which will assist people with income in hidden offshore accounts to become current with their taxes. The disclosure initiative is voluntary and will be available through Aug. 31st of this year.  Individuals with hidden off-shore accounts would be wise to consult with a tax professional in order to get the best information and comply with the regulations. 

IRS Commissioner Doug Shulman says, “As we continue to gather more information and follow more people internationally, the risk to individuals hiding assets offshore increases.” He goes on to say, “This new effort gives people who are hiding money in foreign accounts a tough, fair way to resolve their tax problems. It also gives them a chance to come in before we find them.”

The IRS has decided to open another initiative which follows taxpayers with foreign accounts. The first disclosure program closed with 15,000 individuals sending voluntary disclosures on Oct. 15, 2009. Since then, over 3,000 taxpayers have come forward with bank account information from around the world. They are now eligible to take advantage of the provisions of this new initiative.

The goal here is to get this money back in the U.S.  For the IRS, fighting international tax evasion is a top priority. According to the IRS, there are many more banks under review. The situation is said to get worse for taxpayers who are hiding their assets and income in offshore banks. This new disclosure initiative is their best chance for them to get back into the system.

The new initiative, called the 2011 Offshore Voluntary Disclosure Initiative,  includes many revisions from the 2009 Initiative. The penalty is higher now, which means that people who did not come forward in 2009 won’t be rewarded for coming forward now. The 2011 initiative does have new features, though.

There is a new structure which requires taxpayers to pay a penalty of 25% of the amount in those foreign bank accounts. A few of those taxpayers may be eligible for 5% or 12.5% penalty. Those who comply with the voluntary initiative must also pay back-taxes, and interest, for eight years. They will also be required to pay accuracy-related and/or delinquency penalties.

Taxpayers who participate in this voluntary initiative will have to file all original and amended tax returns. They will also have to include their payments for taxes owed and other penalties by the Aug. 31 deadline.

The IRS also states that they will be making additional modifications to the 2011 disclosure initiative.

Participants will be faced with a 25% penalty, but taxpayers who qualify for limited situations will receive a 5% penalty.

The IRS appointed a new penalty class of 12.5% for smaller offshore accounts. Those with offshore accounts or assets below $75,000 qualify for this lower rate.

The 2011 initiative gives benefits taxpayers which should encourage them to come in now instead of waiting for the IRS to find them. Taxpayers who currently have offshore assets who don’t come forward will face much bigger penalties and the possibility of criminal charges.

Doug Shulman stated that this initiative is fair. It allows people with offshore accounts to come forward so they can “get right” with the IRS. The initiative gives them the opportunity to receive accurate information about how their case will be handled by the IRS. Those taxpayers who do come in on their own accord will also avoid criminal prosecution.

The IRS is taking care of these voluntary disclosures in central areas of the United States to be more efficient in the processing of the applications.

The IRS recently launched a section on irs.gov that includes the terms and conditions of the 2011 Offshore Voluntary Disclosure Initiative. It also includes a set of questions and answers to assist taxpayers and tax professionals alike. The IRS web site also has a detailed section where people can make their voluntary disclosure.

In the 2009 voluntary disclosure program, taxpayers were looking at a 20%  penalty that covered a six-year period. Approximately 15,000 taxpayers presented the IRS with voluntary disclosures in an effort to avoid the high penalties. These disclosures covered banks in over 60 countries.

Shulman said this international effort will increasingly continue as the year goes on.

Secrecy in taxes continues to fall apart. The IRS is not giving up on these international issues. For those taxpayers who are hiding cash or assets offshore, the IRS advises that they come forward now because their risk of being caught is becoming greater.

Daniel Stoica Accounting Professional

IRS Tax Tip: IR-2011-39, April 7, 2011

If you are one of those taxpayers who will do just about anything to get out of paying your taxes, and you think you found a way to get out of it, you might want to reconsider it because the IRS will find out.

The IRS recently released its annual list of the worst tax scams with a warning to consumers to not even try pulling one over on the government. There are probably many taxpayers who haven’t filed yet because they owe money. They may have been thinking about ways to get around paying them, which will cause a lot of problems down the line, including fines, liens, and even jail.

The annual “dirty dozen”, as the IRS refers to scams people have used to evade paying taxes, are listed below. They range from putting money in offshore accounts to claiming non-existence dependents.  Some of the most devious scams have been perpetrated by dishonest tax preparers who used tactics to get more of a refund for their clients and take some off the top for themselves.

Besides the obvious scams, there are some methods that have most likely crossed the minds of many taxpayers. The IRS has reported that some taxpayers have lied about how much they earn, embellished or made up charitable donations and claimed they withheld more in Social Security in order to reduce their taxable income.

The IRS has also reported that some taxpayers try to get out of paying their taxes by claiming that paying taxes is not mandated in the constitution. (There are several videos on YouTube that claim this, as well). Others have even gone as far as to claim that it’s “against their religion”. The Supreme Court has, again and again, determined this to be a unjustified argument.

If the IRS believes you have tried any of these scams, you will be audited and fined $5,000 or more, or even incarcerated for worse offenses. And, if you know someone who has tried to pull off one of these scams, you should notify the IRS. You may be rewarded for your honesty.

Here is the full list of the worst scams:
• Hiding income offshore – This is where taxpayers deposit money in banks in such places as the Cayman Islands or Switzerland
• Identity theft and phishing – This scam has been running rampant for quite some time. People steal IDs and Social Security numbers to take another person’s identity
• Return preparer fraud – Tax preparers making false claims on their clients’ tax returns for their own gain
• Filing false or misleading forms – exaggerating or claiming false information on your tax return to pay less on their taxes
• Frivolous arguments – claiming that paying taxes is unconstitutional or against your religion
• Nontaxable Social Security benefits with exaggerated withholding credits – trying to take more credits and deductions on income that is actually taxable
• Abuse of charitable organizations and deductions – claiming to have given to charity or exaggerating how much you actually did give to a charity
• Abusive retirement plans – transactions that taxpayers use to avoid the limits on contributions to IRAs, as well as transactions that are not properly reported as early distributions
• Disguised corporate ownership – Corporations are formed and operated in certain states for the purpose of disguising the ownership of the business or financial activity by means such as improperly using a third party to request an employer identification number,
• Zero wages – reporting that you made no money at all during the tax year
• Misuse of trusts – the inappropriate use of private annuity trusts and foreign trusts to shift income and deduct personal expenses
• Fuel tax credit scams – individuals who claim the tax credit for nontaxable uses of fuel when their occupations or income levels make the claim unreasonable

To avoid becoming one of the “dirty dozen”, consult with a trusted tax professional to prepare your taxes.

Daniel Stoica Accounting Professional

Tax Help in Spanish – Ayuda con los Impuestos en Español

IRS Tax Tip 2011-08,  January 12, 2011

Tax information can be tough to understand in any language, but it can be even more difficult if it is not in your first language. The IRS offers a wide range of free and easy-to-use products and services for Spanish speaking taxpayers. Here are nine ways you can get help from the IRS if you need assistance with your federal taxes in Spanish:

1. Get answers 24 hours a day seven days a week http://www.irs.gov/espanol has a wealth of information accessible all day, every day for individuals and businesses. You will find links to tax-related information, disaster relief, identity theft and warnings about common tax scams that victimize taxpayers. You can also check the status of your tax refund through the online tool ¿Dónde está mi reembolso? and even find out if you qualify for the Earned Income Tax Credit, a refundable tax credit for many people who earned less than $48,000, using the Asistente EITC on our secure website.
2. Find out all about Free File Let Free File do the hard work for you with brand-name tax software or online fillable forms. It’s exclusively at http://www.irs.gov.  Everyone can find an option to prepare their tax return and e-file it for free. If you made $58,000 or less, you qualify for free tax software that is offered through a private-public partnership with manufacturers. Visit http://www.irs.gov/freefile and select En Español to review your options.
3. Find out about e-file After 21 years, IRS e-file has become the safe, easy and most common way to file a tax return. Last year, 70 percent of taxpayers – 99 million people – used IRS e-file. Starting in 2011, many tax preparers will be required to use e-file and will explain your filing options to you. This is your chance to give it a try. IRS e-file is approaching 1 billion returns processed safely and securely. If you owe taxes, you have payment options to file immediately and pay by the tax deadline. Best of all, combine e-file with direct deposit and you get your refund in as few as 10 days. For more information visit www.irs.gov/espanol and select Opciones Electrónicas to review your options.
4. Get up-to-date at the Multimedia Center Watch YouTube video tax tips and listen to audio podcasts on various IRS topics in Spanish and English by entering the keywords “Centro Multimediático” into the search box of the IRS website.
5. TeleTax is a toll-free, automated telephone service. TeleTax provides helpful pre-recorded tax topic messages and refund information. You can find a list more than 125 TeleTax topics, available in Spanish and English, in the instructions for Form 1040, 1040A or 1040EZ. TeleTax can also help if at least four weeks have passed since you filed your return and you want to check on the status of your federal refund. Having a copy of your return handy will help you respond to the prompts on the automated system. TeleTax is available 24 hours a day, seven days a week at 800-829-4477.
6. Get tax forms and publications You can view and download several tax forms and publications in Spanish directly from http://www.irs.gov/espanol at any hour of the day or night.
7. Visit the IRS Spanish Newsroom Find the agency’s most recent announcements, tips and information on recently implemented tax law that could affect you. Avoid missing any benefits and keep up to date by typing the keywords “Noticias en Espanol” into the search box of the IRS website.
8. Multilingual Assistance at IRS Taxpayer Assistance Centers Multilingual services are offered to taxpayers in more than 150 languages, including Spanish, through bilingual employees and an Over-the-Phone Interpreter. TAC locations, hours and services are available at http://www.irs.gov/individuals by clicking on the link for Contact My Local Office in the left tool bar section.
9. Toll-Free Telephone Assistance is available from Spanish-speaking IRS representatives by calling the IRS customer service line at 800-829-1040 and then pressing 8.