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Top Five Tax Scams

Beware of people offering to lower or eliminate your taxes and anyone offering you a refund. The best tip is use your common sense and if you have a question about a letter, phone call or email you receive, call me at The News On 6 and I'll investigate it for you to determine whether it's real or a fraud. My number is 732-6128.

1. Phishing. Phishing is a technique used by identity thieves to get your personal financial data in order to get into your financial accounts, run up charges on your credit cards or apply for new loans in your name. They send emails that look exactly like they're from a legitimate business, like the IRS, a bank or ebay. They tell you there's a problem with your account and they need you to give them your information again. They usually want you to click on a link. The ones that look like they come from the IRS says you have a refund coming. If you click on the link, it looks very official, but, they usually claim to need a social security number, credit card number or checking account number. Sometimes, they even tell you you're being audited and offer to make things right, if you supply the needed personal information. The IRS DOES NOT communicate with taxpayers through emails. If you wonder if a letter or phone call is really from the IRS, call 1-800-829-1040.

2. Zero Return. Someone tells you to enter all zeros on your federal income tax filings. In a twist on this scheme, filers enter zero income, report their withholding and then write "nunc pro tunc"-- Latin for "now for then"--on the return. They often also do this with amended returns in the hope the IRS will disregard the original return in which they reported wages and other income. If anyone suggests you do this, don't listen.

3. Trust Misuse. For years, unscrupulous promoters have urged taxpayers to transfer assets into trusts. They promise reduction of income subject to tax, deductions for personal expenses and reduced estate or gift taxes. However, some trusts do not deliver the promised tax benefits, and the IRS is actively examining these arrangements. There are currently more than 200 active investigations underway. Always get your tax advice from a trusted professional.

4. Return Preparer Fraud. Dishonest return preparers can cause many headaches for taxpayers who fall victim to their schemes. Such preparers get financial gain by skimming a portion of their clients' refunds and charging inflated fees for return preparation services. They attract new clients by promising large refunds. Taxpayers should choose carefully when hiring a tax preparer. As the old saying goes, "If it sounds too good to be true, it probably is." And remember, no matter who prepares the return, you are ultimately responsible for its accuracy.

5. Credit Counseling Agencies. Taxpayers should be careful with credit counseling organizations that claim they can fix credit ratings, push debt payment plans or impose high set-up fees or monthly service charges that may add to existing debt. Ask about all possible fees and check with the Better Business Bureau before signing up.

To Report Suspected Tax Fraud Activity, use IRS form 3949-A, which you can download from the IRS website at IRS.gov or you can call 1-800-829-3676.

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