Tax Defense Network: Fraud Alert

With the start of the New Year, taxpayers are already starting to prepare their taxes for the tax filing deadline. Every year, the IRS fails to collect more than $380 billion in taxes due to tax fraud. Tax Defense Network believes taxpayers can arm themselves with knowledge to steer clear of tax frauds, and report it when they see one.

What Is Tax Fraud? Tax Defense Network Explains

Not paying taxes knowingly (tax evasion) and not paying taxes because one does not believe in taxes (tax avoidance) are tax frauds punishable under the U.S. tax law. Not filing taxes, hiding income in tax havens, or falsifying information are common methods of tax fraud. Tax Defense Network found that many taxpayers end up filing fraudulent tax returns without their knowledge. This happens when their identity is stolen by tax frauds and used to file inaccurate returns and claim exaggerated refunds.

Tax Defense Network: Tax Fraud & Who Commits It

The IRS identified that small businesses and sole proprietorships are guilty of tax avoidance and tax evasion more than individuals and corporations. Adding to the woes of the federal government are tax refund claims by tax frauds.

The IRS detected and stopped $1.3 billion potentially fraudulent tax returns in 2012. Still, this was not enough. The IRS’ Dirty Dozen Tax Scams report included identity theft as the number one tax fraud in the country. Every year, thousands of taxpayers fall victim to identity theft. For all those tax thieves that escape punishment, it is law abiding taxpayers that end up paying the taxes lost.

Apart from tax frauds that dupe several taxpayers, many individual taxpayers also try to make a quick buck by:

 

  • Claiming false deductions
  • Reducing income figures
  • Inflating expenses
  • Adding business expenses as personal expenses
  • Claiming excessive exemptions
  • Hiding money in offshore bank accounts

 

Non-payment of taxes results in penalties by the IRS along with strict action to collect all taxes owed. For tax evasion, taxpayers may face fines and/or imprisonment.

Tax Defense Network Exposes Fraud by Tax Preparers

Many tax preparers that seem professional and authentic cheat taxpayers by filing inaccurate tax returns on their behalf, collect huge fees from the refunds and then disappearing. To cure this stubborn problem, the IRS created the PTIN (Preparer Tax Identification Number) network that all tax preparers must have and include in all tax returns they file on behalf of their clients. This unique number helps the IRS track a tax preparer to the tax returns filed.

Tax Defense Network exposes fraud so that taxpayers can spot and report any suspected deceptive behavior this tax season. Most fraudulent tax preparers either keep taxpayers in the dark to then gain their signature on the return, or file fake returns. The most common signs of tax preparer fraud are:

 

  • Charging a percentage of money received from their refund as the fee
  • Keeping information on tax returns secret
  • Avoiding/postponing giving a copy of the return to the taxpayer
  • Encouraging taxpayers to falsify information to claim large refunds

 

Not falling for tempting offers and phishing attempts while always checking a tax return before signing it can remove many threats during the tax season. Tax Defense Network fraud alert equips taxpayers with the most potent weapon that can defend them: knowledge.

From the Author: Tax Resolution Legal Team

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