Compiled by Courier Staff
According to Christopher Miller, IRS Media Relations for Wisconsin, Iowa and Nebraska “In the Milwaukee metro area we are seeing a scam that focuses on the filing of tax returns that claim a refund. The problem is that the claim is based on fictitious withholding from social security benefits. Because the withholding never took place, and is therefore false, the refund is neither allowed nor legitimate.”
People are being victimized because they end up paying the scammer a fee to prepare these type of returns, only to find out their claims are rejected or they have to return the money to the IRS, plus potential penalties and interest. That’s why it’s important to make sure your family and friends are aware of the scam, so that innocent people don’t fall victim to it.
This scam which gained much traction in Milwaukee, caught the attention of the national office in Washington, D.C. of the IRS, and led to the warning that is now being launched by the agency.
Most paid tax return preparers provide honest and professional service, but there are some who engage in fraud and other illegal activities. Unscrupulous promoters deceive people into paying for advice on how to file false claims. Some promoters may charge unreasonable amounts for preparing legitimate returns that could have been prepared for free by the IRS or IRS sponsored Volunteer Income Tax Assistance partners. In other situations, identity theft is involved.
Miller also shared that, “Many of these claims are filed using the standard IRS Form 1040A. An amount is typically included to represent the social security benefits received by the taxpayer and other lines are also completed on the form. However, much of the information is often inaccurate or false”.
He continued, “Some taxpayers who participate in these tax scams don’t even realize they are filing erroneous claims with IRS. That’s why the IRS reminds everyone to ensure that the information you’re putting on any tax return is truthful and accurate. After all, your signature is your stamp of approval”.
Taxpayers should be wary of any of the following:
- Fictitious claims for refunds or rebates based on excess or withheld Social Security benefits.
- Claims that Treasury Form 1080 can be used to transfer funds from the Social Security Administration to the IRS enabling a payout from the IRS.
- Unfamiliar for-profit tax services teaming up with local churches.
- Home-made flyers and brochures implying credits or refunds are available without proof of eligibility.
- Offers of free money with no documentation required.
- Promises of refunds for “Low Income – No Documents Tax Returns.”
- Claims for the expired Economic Recovery Credit Program or Recovery Rebate Credit.
- Advice on using the Earned Income Tax Claims based on exaggerated reports of self-employment income.
- In some cases non-existent Social Security refunds or rebates have been the bait used by the con artists. In other situations, taxpayers deserve the tax credits they are promised but the preparer uses fictitious or inflated information on the return which results in a fraudulent return.
Flyers and advertisements for free money from the IRS, suggesting that the taxpayer can file with little or no documentation, have been appearing in community churches around the country. Promoters are targeting church congregations, exploiting their good intentions and credibility. These schemes also often spread by word of mouth among unsuspecting and well-intentioned people telling their friends and relatives.
Promoters of these scams often prey upon low income individuals and the elderly. They build false hopes and charge people good money for bad advice. In the end, the victims discover their claims are rejected or the refund barely exceeds what they paid the promoter.
Meanwhile, their money and the promoters are long gone.
Unsuspecting individuals are most likely to get caught up in scams and the IRS is warning all taxpayers, and those that help others prepare returns, to remain vigilant. If it sounds too good to be true, it probably is.
What happens to people who are caught?
Generally, the IRS does not discuss enforcement activities. But overall, the IRS is taking this scam very seriously. In general, the IRS pursues enforcement actions against those who promote schemes or entice others to violate the law. The penalty for filing fraudulent returns with the IRS can be up to $5,000. The IRS pursues the organizers of scams and can recommend criminal prosecution.
What should people do?
Always verify alleged government rebates and benefits that are unfamiliar to you by contacting the government agency directly before you give someone your personal information or pay them to file a claim on your behalf.
In addition to losing fees paid to a scammer, giving out personal information to someone you don’t know for reasons you haven’t verified could subject you to penalties, interest and even potentially identity theft.
If someone tells you to sign a tax return, and you don’t know where the numbers on the return come from or you can’t support the information with documentation, then you shouldn’t sign the return – it’s just common sense. Remember, if something sounds too good to be true, it probably is.
Remember that even though information about such a “rebate” or government benefit may be passed along to you by family, friends or others you trust, they may be misinformed. Always check with the government agency directly.
In some cases, the IRS has erroneously issued checks when these false claims have been submitted, which can make the scam seem more legitimate. But immediately upon identifying a scam, the IRS initiates a recovery process to vigorously pursue collection of the money. The bad thing for those people involved is they not only have to return the money, but they may also often be charged additional penalties and interest by the IRS.
Anyone with questions about a tax credit or program, or scams, should visit www.IRS.gov, call the IRS toll-free number at 800-829-1040 or visit a local IRS Taxpayer Assistance Center.