Tax Prep Scams

As if having to worry about how much income tax you owe and how you're going to pay it isn't enough, now the IRS is warning about an increasing number of fraudulent income tax scams.

According to the IRS, the following are the most common tax fraud schemes now making the rounds:

Offshore "Business Transactions"

Taxpayers are urged to use a foreign credit card, trust or other alleged "business arrangement" to hide taxable income. The advice often comes from sophisticated-sounded tax "professionals" who seem to have their act together. Don't believe it. The IRS is aggressively tracking down the promoters of these bogus trusts, and also holding gullible taxpayers accountable.

Identity Theft

Scammers use personal data such as your social security number and financial info to steal financial accounts, run up existing credit card balances and apply for new credit cards and services in your name. So pick your tax professional carefully and be very picky about who you decide to trust with financial info.

Phony Tax Payment Checks

Fraudsters sell fake documents that look like checks, to be used to pay the IRS. Some schemers even advise you use a phony check to overpay your taxes so you can receive a refund. Of course, this doesn't work: not only do you eventually have to cough up real funds to pay your taxes, you may then owe penalties as well. Not to mention the possibility of federal tax fraud prosecution.

Employers Not Withholding Taxes

If you're encouraged not to withhold income tax or other employment taxes from your employees' wage, run in the opposite direction. This interpretation of the tax law isn't valid, and the IRS has recently taken promoters to court.

If you have concerns about employment taxes and your employer, you can call the IRS at 1-800-829-1040.

Pay A Tax, Win A Prize

Beware any caller telling you you've won a prize, and all you have to do to receive the prize is to pay them the tax that's due on the prize. A real prize giver usually sends the prize and an IRS Form 1099 to the winner, and the winner is expected to pay any taxes directly to the IRS.

"Taxes Are Unconstitutional" Theories

Many scammers sell "untax packages" that suggest that paying income tax is "voluntary." But courts have repeatedly rejected these arguments, and citizens who use this ploy can end up not only owing extra tax penalties, but being prosecuted as well. Not a pretty picture.

Social Security Tax Schemes

Some scammers offer to file a claim to get a refund for social security paid into the IRS, in exchange for a "paperwork" fee of $100 plus a percentage of any social security tax refund received. Not only do you not get the refund, but you don't get your "paperwork" fee refunded either.

Slavery Reparation Tax Refund

Thousands of African-Americans have been ripped off by con artists offering to share secrets for filing a bogus tax credit or refund related to reparations for slavery. Some promoters of these schemes have already been convicted and imprisoned.

IRS "Agents" Paying Home Visits

Beware of anyone just showing up at your home claiming to be an IRS agent, pressuring you into writing a check on the spot. Real IRS field agents carry IRS photo IDs and call ahead. If you suspect an IRS imposter, call your local police and the Treasury Inspector General's hotline at 1-800-366-4484.

While many tax professionals charge legitimate fees for genuine advice and tax preparation services, it's best to beware of what seems like outrageous guarantees and promises. As the IRS warns, if it seems too good to be true, it probably is.