Post Your Problems/Lawrence Walsh: IRS has its own take on the Dirty Dozen

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On March 26, three weeks before the income tax filing deadline, the Internal Revenue Service issued its annual "Dirty Dozen" list of tax scams that range from identity theft to fraud perpetrated by tax preparers.

But let's not be too critical.

It just shows that procrastinators exist on both sides of the annual tax-filing equation. And procrastinating taxpayers still have four days to get their returns in the mail before the midnight Monday deadline.

The Dirty Dozen, which the IRS compiles every year, lists a variety of scams that crooks use to separate taxpayers from their money. The IRS said many of the scams peak during filing season as people prepare their tax returns.

Procrastinators may be more susceptible to being victimized by them, especially during the numbers-crunching days leading up to April 15.

Acting IRS commissioner Steve Miller said in a statement that the Dirty Dozen list shows that scams come in many forms during filing season. He warned taxpayers not to let a scam artist steal from them or talk them into doing something they will regret.

He said the IRS has increased its efforts to protect taxpayers "from a wide range of schemes" and is "moving aggressively to combat identity theft and refund fraud."

Here's the 2013 Dirty Dozen:

Identity theft; phishing; return preparer fraud; hiding income offshore; "free money" from the IRS and tax scams involving Social Security; impersonation of charitable organizations; false/inflated income and expenses; false Form 1099 refund claims; frivolous arguments; falsely claiming zero wages; disguised corporate ownership; misuse of trusts.

Let's consider identity theft, the No. 1 problem the agency faces.

Mr. Miller said identity theft has become a multibillion dollar business for crooks. They use the names, Social Security numbers or other personal information of their victims to file a tax return and claim a refund fraudulently.

Crooks make up wages and withholding information, claim a few deductions and tax credits to generate a larger refund, file the phony tax returns electronically (thus avoiding the need for a paper W2 form) and then wait for the refund to be deposited electronically into their bank accounts.

Some accounts opened by crooks received more than 300 refunds each from the IRS, according to J. Russell George, the treasury inspector general for tax administration. He testified in May before the House Ways and Means Committee.

Mr. Miller said his agency is fighting back.

He said the IRS conducted a successful coast-to-coast identity theft enforcement sweep in January that led to 298 indictments, informations, complaints and arrests. He said the agency filed 2,400 enforcement actions against identity thieves last year.

"The criminal investigation unit has devoted more than 500,000 staff hours to fighting this issue," he said.

He also said there has been "a significant increase in the number and quality of identity theft screening filters that catch fraudulent tax returns before refunds are issued." The IRS also is working with more than 130 financial institutions to identity these scams and prevent refunds from getting to the crooks.

"We know identity theft is a frustrating and complex process for victims," Mr. Miller added. He said the IRS has 3,000 employees working on such cases - more than twice the number from 2011- and has trained 35,000 employees to help taxpayers with identity theft problems.

"Taxpayers who believe they are at risk of identity theft due to lost or stolen personal information should contact the IRS immediately so the agency can take action to secure their tax account," he said.

The toll-free number for the agency's Identity Protection Specialized Unit is 1-800-908-4490. A special section on www.IRS.gov provides YouTube videos, tips for taxpayers and an assistance guide.

The agency also is issuing Identity Protection Personal Information Numbers (IP PINS) to victims that identify them as the rightful filer of their returns. The IRS said it has issued IP PINS this year to more than 770,000 taxpayers who have been victimized by identity theft.

yourbiz - larrywalsh

Lawrence Walsh can be reached at pyp@post-gazette.com and 412-263-1895. Please include your name and day, evening and/or cell phone number(s). Due to volume, he cannot respond to every email or phone call.


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