Tax Scams

Most consumers are always looking for ways to cut their tax bill. Unfortunately, con artists are always looking for filers who are eager to find tax breaks. The Better Business Bureau, along with the Internal Revenue Service (IRS), reminds taxpayers not to fall victim to a variety of tax scams. Here are a few:

• Special Tax Refund for African Americans: Promoters are shamelessly preying upon African Americans offering to file for tax credits or refunds related to reparations for slavery. There is no provision in the tax law that allows African Americans to get tax credits or refunds related to slavery reparations. Some unscrupulous promoters have encouraged clients to pay them up-front to prepare a claim for this refund. In the end, the victims discover their refund claims are rejected, and their money and the promoters are long gone.
• No Taxes Withheld From your Wages: Illegal schemes are being promoted that instruct employers not to withhold federal income tax or employment taxes from wages paid to their employees. These schemes are based on an incorrect interpretation of tax laws. Employers are required by law to withhold employment taxes from their employees. Employers who do not comply with the employment tax laws may be subject to criminal and civil sanctions for willfully failing to pay employment taxes.
• Big Refunds.for a Fee: These scam artists approach you wanting to "borrow" your Social Security Number or give you a phony W-2 so it appears that you qualify for a big refund. They may offer to split the refund with you. Keep in mind, that anyone who promises you a bigger refund without knowing your tax situation is most likely misleading you. Never sign a tax return without looking it over to make sure it is honest and correct.
• Pay the Tax and Get a Prize: If you have won a prize and the promoter claims that you have to pay the income tax due in order to receive it, don't believe it! If you have really won a prize, you may need to make an estimated tax payment to cover the taxes that will be due at the end of the year. But the payment would go to the IRS, not the prize promoter. Whether you have won cash, a car or a trip, the prize giver generally sends you and the IRS a Form 1099 showing the total prize value that should be reported on your tax return.

  Before you do business with a company, check them out with the Better Business Bureau. To report suspected tax fraud activity, contact the IRS at 1.800.829.0433. Additional information on tax fraud is available at www.treas.gov/irs/ci/index.htm.