IRS warns of taxpayer scam

Published 10:50 pm Friday, July 29, 2011

The Internal Revenue Service this week encouraged Alabama taxpayers to guard against being misled by unscrupulous individuals trying to persuade them to file false claims for tax credits or rebates.

To report suspected tax scam activity in Alabama, contact the IRS Criminal Investigation office in Mobile at (251) 341-5982.

The IRS warned that the elderly and those who receive Social Security or other government benefits are primarily the ones being targeted by the scammers. The victims are led to believe they should file a return with the IRS for tax credits, refunds or rebates for which they are not really entitled.

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“(These scams) come in different forms, but all of them kind of refer to some kind of government rebate or stimulus money, free money, in some cases it tells you that it is money the government wants to give away,” Boone said. “The scammers will encourage them to pay to have (targets) to fill out tax returns for 2008, 2009 and 2010, requesting refunds for each of those years.”

The IRS has noted an increase in tax-return-related scams frequently involving unsuspecting taxpayers who normally do not have a filing requirement in the first place.

“In this particular scam, it appears they are targeting elderly and low-income people, people who are on some type of government assistance,” IRS spokesperson Dan Boone said. “In this economy, the promise of free money is pretty enticing, so folks tend not to ask the questions they need to ask and be suspicious like they need to be.”

In Alabama, the scams are most active in Clarke, Dallas, Hale, Marengo, Mobile, Montgomery, Perry, Washington and Wilcox Counties. Boone said occurrences have been reported in Demopolis, Faunsdale, Linden, Thomaston, Greensboro, Jackson, Thomasville and Grove Hill among other places.

“These schemes often spread by word of mouth among unsuspecting and well-intentioned people telling their friends and relatives,” Boone said. “The scammers have actually convinced some church congregations that this is a legitimate thing.”

These scams have been reported in 33 states, including Alabama, Florida, Georgia, Mississippi, and Tennessee. In the Southeast, the scam appears to be most active in Alabama and Mississippi.

“They are paying good money for bad information and by the time they become aware of that, the scammer is long gone,” Boone said of the scams.

Reginael D. McDaniel, Special Agent in Charge of IRS Criminal Investigation, Atlanta Field Office said, ”Refunds, credits or rebates are to be issued only to those who are entitled to them, so I would like to advise taxpayers to please be cautious before signing up for any tax credit or rebate. I would also like to warn anyone who is willing to become involved in the proliferation of these schemes, you are exposing yourself to felony prosecution and possible incarceration.”

“If the IRS accidentally processes that return and sends a check, which has happened then the filer will have to eventually pay back the amount of the check with penalties,” Boone explained.

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 for the Recovery Rebate Credit.

· Advice on claiming the Earned Income Tax Credit 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.

Promoters of these scams often prey upon low income individuals and the elderly. 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.

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,” Boone said.

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.

Anyone with questions about a tax credit or program should visit www.IRS.gov, call the IRS toll-free number at 800-829-1040 or visit a local IRS Taxpayer Assistance Center.

For questions about rebates, credit and benefits from other federal agencies contact the relevant agency directly for accurate information.