New tax scam targets West Alabama counties

Published 12:00 am Wednesday, December 12, 2007

Last week, the Internal Revenue Service issued a warning about a tax scam targeting those on social security retirement or social security disability in West Alabama.

According to Dan Boone, media specialist for the IRS, Choctaw, Lamar, Pickens, Sumter and Washington counties have all had instances of this new scam. Other counties who might also be effected are Butler, Clarke, Dallas, Fayette, Greene, Hale, Lowndes, Marengo, Perry, Tuscaloosa and Wilcox.

The IRS first received word of a possible scam when individuals and banks reported a large quantity of checks being cashed, which sent up the red flag for a scam, Boone said.

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Previously, social security tax scams have tricked people into filing for refunds on the social security taxes paid out of a person&8217;s paycheck, but this scam goes even further.

The way this scam usually works is a scam artist will offer to prepare their tax returns for free, reporting part or all of your Social Security benefits as taxable income. They may falsely claim some percentage of the benefits as tax withholding or claim the Earned Income Tax Credit, thereby generating a refund.

Then scammers often prepare as many as three years worth of false refund claims per person or couple. The victim then files the fraudulent tax returns and may even erroneously receive a refund from the IRS.

However, even if the IRS issues the requested refund, the agency will demand the money back with interest and perhaps a penalty. By that time, the scam artist has moved on and the victim is out the fees they paid to prepare the false returns.

Boone said the bottom line is this: Retirement or disability benefits received generally cannot be used to generate a legal tax refund. Any such claim filed with the IRS may result in civil or criminal penalties.

If you or someone you know has become a victim of this scam, the first step is to contact local law enforcement to report the scammer you dealt with. Then, you should file an amended tax return (Form 1040X) to reverse each false return filed.

Boone said taxpayers should be prepared to pay back any refund you received as a result of a false return, plus penalties and interest. Furthermore, a person should return all non-cashed scam-related refund checks to the IRS immediately.

If you have questions about how to prepare and file an amended tax return, please contact the IRS toll-free at 1-800-829-1040 or visit