12 Dirtiest Tax Schemes

Beware of these sneaky tax day scams.

Hiding Income Offshore - For years, individuals have been identified for hiding income in offshore banks, brokerage accounts or nominee entities. While there are legitimate reasons for maintaining financial accounts abroad, there are requirements that need to be reported. U.S. taxpayers who maintain such accounts and who do not comply with reporting and disclosure requirements are breaking the law and risk significant penalties and fines, as well as the possibility of criminal prosecution. At the beginning of this year, the IRS reopened the Offshore Voluntary Disclosure Program (OVDP) to encourage individuals to bring their money back into the U.S. tax system.(Photo: Rick Wilking/Landov)

1 / 13

Protect Your Assets - The IRS warns that tax payers must be especially skeptical of too-good-to-be-true offers that could set them up to become victims of identity theft and fraud among other crimes. Keep reading for a breakdown of the sneakiest tax scams to avoid. — Britt Middleton (Photo: REUTERS/Rick Wilking /Landov)

Identity Theft - Identity theft occurs when someone uses your personal information such as your name, Social Security number (SSN) or other personal information without your permission, such as filing a fraudulent tax return, and claim a refund in your name. Click here to learn about ways you can secure your personal information or contact the IRS as soon as possible if you feel you may already be a victim of identity theft. (Photo: Getty Images)

2 / 13

Identity Theft - Identity theft occurs when someone uses your personal information such as your name, Social Security number (SSN) or other personal information without your permission, such as filing a fraudulent tax return, and claim a refund in your name. Click here to learn about ways you can secure your personal information or contact the IRS as soon as possible if you feel you may already be a victim of identity theft. (Photo: Getty Images)

Lock Your Phone - If your phone gets stolen, hackers can easily access your information by searching your device. Create a device password to give them less immediate access. Go to your phone’s settings menu and configure the device so that a password is needed every time the phone is turned on.

3 / 13

Phishing - Known as phishing, cyber crooks bate unsuspecting victims with the help of unsolicited emails or a fake website that poses as legitimate and prompts them to provide valuable personal and financial information. Be wary of opening emails from recipients you don't know and report any suspicious emails to the IRS at phishing@irs.gov. (Photo: San Jose Mercury News/MCT /Landov)

Return Preparer Fraud - Do your research about a tax preparer before committing and make sure that they sign the returns they prepare and enter their IRS Preparer Tax Identification Numbers (PTINs). For tips about choosing a preparer, red flags, details on preparer qualifications and information on how and when to make a complaint, visit www.irs.gov/chooseataxpro. (Photo: Tim Boyle/Getty Images)

4 / 13

Return Preparer Fraud - Do your research about a tax preparer before committing and make sure that they sign the returns they prepare and enter their IRS Preparer Tax Identification Numbers (PTINs). For tips about choosing a preparer, red flags, details on preparer qualifications and information on how and when to make a complaint, visit www.irs.gov/chooseataxpro. (Photo: Tim Boyle/Getty Images)

Return Preparer Fraud - Be careful of tax preparers. Most may be honest, but in some cases return preparers have skimmed off their clients’ refunds, charged inflated fees for return preparation services and attracted new clients by promising guaranteed funds.   In 2012, every paid preparer needs to have a Preparer Tax Identification Number (PTIN) and enter it on the returns he or she prepares.Signals to watch for when you are dealing with an unscrupulous return preparer include:−Preparer does not sign the return or add a Preparer Tax Identification Number.−Does not give you a copy of your tax return.−Promises larger than normal tax refunds.−Charges a percentage of the refund amount as a preparation fee.−Requires you to split the refund to pay the preparation fee.(Photo: CHRISTIAN HARTMANN/Landov)

5 / 13

Hiding Income Offshore - It is illegal to evade U.S. taxes by hiding income in offshore banks, brokerage accounts or nominee entities, using debit cards, credit cards or wire transfers to access the funds. To stay on the safe side, the appropriate reporting requirements must be fulfilled in order to avoid penalties, fines and potential criminal charges. (Photo: Reuters)

ADVERTISEMENT
/content/dam/betcom/images/2012/03/National-03-16-03-31/032912-national-polls-of-the-week-economy.jpg

6 / 13

There's No Such Thing as "Free Money" - Beware of flyers and advertisements for "free money from the IRS," encouraging taxpayers to make fictitious claims for refunds or rebates based on false statements of entitlement to tax credits. These schemes typically prey on low-income individuals and the elderly. To learn more about tax scams, visit the IRS Consumer Alert page. (Photo: REUTERS/Eric Thayer)

Severe Weather Outbreak - From April 30-May 1, the Ohio Valley was lashed with 38 tornadoes that caused an estimated $4 billion in damage.(Photo: Tom Pennington/Getty Images)

7 / 13

Impersonation of Charitable Organizations - Be wary of charities with names that are similar to familiar or nationally known organizations (click here for the IRS' guide to tax-exempt organizations) and don’t give out personal financial information, such as Social Security numbers and bank account pass codes. (Photo: Tom Pennington/Getty Images)

Higher Taxes for More - According to a Tax Policy Center report, 88 percent of taxpayers would see their taxes rise by an average of $3,500 per year. Households with incomes of $50,000 to $75,000 would see an increase of $2,400 per year.  (Photo: Comstock/STOCK)

8 / 13

Fraudulent and Inflated Income and Expenses - Claiming income you did not earn or expenses you did not pay in order to secure larger refundable credits such as the Earned Income Tax Credit can lead to repayment of fraudulent refunds, penalties and possibly criminal prosecution. (Photo: Comstock/Getty Images)

False Form 1099 Refund Claims - In this scam, a person may encourage an individual to file a fake information return, such as a Form 1099 Original Issue Discount (OID), to justify a false refund claim on a corresponding tax return. You can still be held liable for financial penalties and potential criminal charges. (Photo: Courtesy of The Internal Revenue Service)

9 / 13

False Form 1099 Refund Claims - In this scam, a person may encourage an individual to file a fake information return, such as a Form 1099 Original Issue Discount (OID), to justify a false refund claim on a corresponding tax return. You can still be held liable for financial penalties and potential criminal charges. (Photo: Courtesy of The Internal Revenue Service)

Falsely Claiming Zero Wages - Filing phony information is illegal. Taxpayers should resist any temptation to participate in any variations of this scheme. Filing this type of return may result in a $5,000 penalty.(Photo: Detroit Free Press/MCT/Landov)

10 / 13

Frivolous Arguments - Scammers may try to encourage you to use any number of offenses to avoid paying the taxes you owe.  The IRS has a list of frivolous tax arguments that taxpayers should avoid. (Photo: Detroit Free Press/MCT /Landov)

ADVERTISEMENT
Claiming Zero Wages - Using fake information on your return to lower the amount of taxes owed is illegal and can result in a $5,000 penalty. In this scam, using Form 4852 (a substitute W-2) or  a “corrected” 1099 form is used as a way to improperly reduce taxable income to zero. (Photo: Andrew Harrer/Bloomberg via Getty Images)

11 / 13

Claiming Zero Wages - Using fake information on your return to lower the amount of taxes owed is illegal and can result in a $5,000 penalty. In this scam, using Form 4852 (a substitute W-2) or  a “corrected” 1099 form is used as a way to improperly reduce taxable income to zero. (Photo: Andrew Harrer/Bloomberg via Getty Images)

Purchase Anonymously - While bitcoins seem like a science-fiction reality, which makes purchasing much easier, there are some disadvantages to the virtual coins. People can purchase almost anything from drugs to child pornography anonymously online. This form of anonymity could cause illegal transactions to peak online.(Photo: Tetra Images/Getty Images)

12 / 13

Disguised Corporate Ownership - Some third parties are hired by companies to use employer identification numbers and form corporations that obscure the true ownership of the business. The groups then help their clients commit fraud by underreporting income and avoid filing tax returns, among other crimes. (Photo: Getty Images)

Rental Assistance - About 125,000 low-income families that receive rental assistance through the Department of Housing and Urban Development's Choice Voucher program will find themselves at immediate risk of losing their housing.  (Photo: Justin Sullivan/Getty Images)

13 / 13

Misuse of Trusts - For years, scammers have coerced taxpayers into transferring their assets into trusts. The IRS warns that while there are legitimate uses of trusts in tax and estate planning, some transactions falsely promise reduction of income subject to tax, deductions for personal expenses and reduced estate or gift taxes. These types of trusts are primarily used as a means of avoiding income tax liability and hiding assets from creditors, including the IRS. (Photo: Justin Sullivan/Getty Images)