IRS Completes Its 'Dirty Dozen' List of Tax Scams for the 2017 Filing Season

The annual list highlights scams that taxpayers may encounter throughout the year—but many of these schemes peak during tax filing season

Dirty Dozen tax scams 2017
Image: NCCC
February 20, 2017

The Internal Revenue Service (IRS) has completed its Dirty Dozen list of tax scams for the 2017 filing season. The annual list highlights various schemes that taxpayers may encounter throughout the year, many of which peak during tax-filing season.

The IRS stresses that taxpayers need to guard against ploys to steal their personal information, scam them out of money, or talk them into engaging in questionable behavior with their taxes.

"We continue to work hard to protect taxpayers from identity theft and other scams," said IRS Commissioner John Koskinen. "Taxpayers can and should stay alert to new schemes which seem to constantly evolve. We urge them to do all they can to avoid these pitfalls – whether old or new."

Perpetrators of illegal schemes can face significant fines and possible criminal prosecution. IRS Criminal Investigation works closely with the U.S. Department of Justice to shut down scams and prosecute the criminals behind them. Taxpayers should keep in mind that they are legally responsible for what is on their tax return even if it is prepared by someone else. Be sure the preparer is up to the task. Find out more about choosing a tax professional.

Here's a recap of this year's Dirty Dozen list of tax scams:

Phishing: Taxpayers need to be on guard against fake emails or websites looking to steal personal information. The IRS will never initiate contact with taxpayers via email about a bill or refund. Don't click on one claiming to be from the IRS. Be wary of emails and websites that may be nothing more than scams to steal personal information.

Phone Scams: Phone calls from criminals impersonating IRS agents remain an ongoing threat to taxpayers. The IRS has seen a surge of these phone scams in recent years as con artists threaten taxpayers with police arrest, deportation and license revocation, among other things.

Identity Theft: Taxpayers need to watch out for identity theft especially around tax time. The IRS continues to aggressively pursue the criminals that file fraudulent returns using someone else's Social Security number. Though the agency is making progress on this front, taxpayers still need to be extremely cautious and do everything they can to avoid being victimized.

Return Preparer Fraud: Be on the lookout for unscrupulous return preparers. The vast majority of tax professionals provide honest high-quality service. There are some dishonest preparers who set up shop each filing season to perpetrate refund fraud, identity theft and other scams that hurt taxpayers.

Fake Charities: Be on guard against groups masquerading as charitable organizations to attract donations from unsuspecting contributors. Be wary of charities with names similar to familiar or nationally known organizations. Contributors should take a few extra minutes to ensure their hard-earned money goes to legitimate and currently eligible charities. IRS.gov has the tools taxpayers need to check out the status of charitable organizations.

Inflated Refund Claims: Taxpayers should be on the lookout for anyone promising inflated refunds. Be wary of anyone who asks taxpayers to sign a blank return, promises a big refund before looking at their records or charges fees based on a percentage of the refund. Fraudsters use flyers, advertisements, phony storefronts and word of mouth via community groups where trust is high to find victims.

Excessive Claims for Business Credits: Avoid improperly claiming the fuel tax credit, a tax benefit generally not available to most taxpayers. The credit is usually limited to off-highway business use, including use in farming. Taxpayers should also avoid misuse of the research credit. Improper claims often involve failures to participate in or substantiate qualified research activities and/or satisfy the requirements related to qualified research expenses.

Falsely Padding Deductions on Returns: Taxpayers should avoid the temptation to falsely inflate deductions or expenses on their returns to pay less than what they owe or potentially receive larger refunds. Think twice before overstating deductions such as charitable contributions and business expenses or improperly claiming credits such as the Earned Income Tax Credit or Child Tax Credit.

Falsifying Income to Claim Credits: Don't invent income to erroneously qualify for tax credits, such as the Earned Income Tax Credit. Taxpayers are sometimes talked into doing this by con artists. Taxpayers should file the most accurate return possible because they are legally responsible for what is on their return. This scam can lead to taxpayers facing large bills to pay back taxes, interest and penalties. In some cases, they may even face criminal prosecution.

Abusive Tax Shelters: Don't use abusive tax structures to avoid paying taxes. The IRS is committed to stopping complex tax avoidance schemes and the people who create and sell them. The vast majority of taxpayers pay their fair share, and everyone should be on the lookout for people peddling tax shelters that sound too good to be true. When in doubt, taxpayers should seek an independent opinion regarding complex products they are offered.

Frivolous Tax Arguments: Don't use frivolous tax arguments to avoid paying tax. Promoters of frivolous schemes encourage taxpayers to make unreasonable and outlandish claims even though they have been repeatedly thrown out of court. While taxpayers have the right to contest their tax liabilities in court, no one has the right to disobey the law or disregard their responsibility to pay taxes. The penalty for filing a frivolous tax return is $5,000.

Offshore Tax Avoidance: The recent string of successful enforcement actions against offshore tax cheats and the financial organizations that help them shows that it's a bad bet to hide money and income offshore. Taxpayers are best served by coming in voluntarily and getting caught up on their tax-filing responsibilities. The IRS offers the Offshore Voluntary Disclosure Program to enable people to catch up on their filing and tax obligations.

Find more tax-related resources at IRS.gov.

Get Connected with Consumer Connections

Stay up-to-date about issues that really matter! Get the Consumer Connections newsletter!

We're committed to providing you with information you need to make you a better, more informed consumer. Whether it's a vehicle recall, a product recall, or a new scam, we feature it in Consumer Connections.

So why not give it a try? Go on. All of your friends are doing it. It's completely free and comes just once a week.

You've finally filled out all the paperwork for a new or used car and drive it off the lot in triumph. Then, only a few hours (or days or weeks) later, the dealer calls you and tells you that you have to return the car because your financing didn't go through. What's going on? Is this legal? No.

According to the scam alert released by the Better Business Bureau (BBB), scammers are targeting unsuspecting consumers across the country by impersonating cable companies and taking advantage of subscribers' eagerness to save money on cable television services.

Do you know how to protect yourself against computer fraud? Most people think they can spot a scam, but scammers are getting better every day. It's now sometimes very difficult to know who is on the other end of the Internet and whether an email or website is truly legitimate.

We use our phones to do all kinds of things. But those who use USB charging stations may want to think twice before checking off the first two items on that list. Security researchers have discovered a way to hack into smartphones using USB stations and view and record everything that is displayed on the screen.