Each year, the Internal Revenue Service puts out a list of the top 12 tax scams to avoid — as victim or perpetrator.
Here is this year's list:
Identity theft: The IRS says it has a comprehensive strategy targeting ID theft. It also has increased internal reviews "to spot false tax returns before tax refunds are issued and is working to help victims of identity-theft refund schemes."
Phishing: With this tactic, a thief sends an email or sets up a fake Web site with the hope of luring consumers to giving up some of their personal information. The IRS doesn't send you an email out of the blue asking for information.
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And if you get such an email, you should forward it to firstname.lastname@example.org.
Return preparer fraud: Shady preparers have taken clients' refunds, overcharged customers and have promised fat refunds to gain new clients. If you don't deserve a fat refund, though, you can end up getting burned.
Hiding income offshore: The IRS notes that while there are legitimate reasons for maintaining financial accounts abroad, there are certain reporting requirements that need to be fulfilled.
"Free money" from the IRS and tax scams involving Social Security: The IRS says this scam has been cropping up in community churches. The scammers convince the elderly and those with lower incomes that they are entitled to money from the IRS and Social Security. The con artists collect a fee, but the filer's claims are rejected.
False or inflated income and expenses: The IRS said some filers will include income that wasn't earned or expenses that weren't incurred to maximize refundable credits.
False Form 1099 refund claims: This involves creating a false federal income tax form to claim tax breaks.
Frivolous arguments: One of them is that the 16th Amendment, which permits tax collections, wasn't ever ratified, so you don't have to pay taxes. Not true, as some jailed celebrities have found out.
Falsely claiming zero wages: Filing this type of return might result in a $5,000 penalty.
Abuse of charitable organizations and deductions: Among the possible frauds is overvaluing donations of non-cash items with promises made by the charity that the goods can be repurchased for a set price later.
Disguised corporate ownership: Some people hide the true ownership of a business so they can avoid taxes.
Misuse of trusts: You can't always use a trust to shelter assets from taxes.