What is the IRS “Dirty Dozen”?

The IRS Dirty Dozen is an annual list of the 12 most prominent tax scams threatening taxpayers and the tax preparation ecosystem at any given time.

This awareness campaign focuses on emerging new schemes and persistent threats by highlighting the worst and most damaging fraudulent activities people might encounter.

Tactics running the gamut from identity theft to inflated refund promises can leave people unwittingly owing back taxes, interest, and fines they never accounted for.

By issuing the Dirty Dozen advisory, the IRS aims to arm taxpayers with information to recognize risks, safeguard themselves from current scams, and understand the potential enforcement consequences of ploys robbing them of money, data, or legal standing.

While the Dirty Dozen list contains completely illegal tactics, it also encompasses legally dubious grey areas where seemingly harmless opportunities to pay less tax turn out to entail civil penalties or even criminal prosecution. So beyond overt fraud, the list also brings light to more subtle forms of non-compliance carrying harsh consequences.

By understanding the current cons contained in the Dirty Dozen, people have actionable information to combat evolving scammer tactics targeting taxation processes.

How can I avoid getting ripped off by my tax preparer?

To reiterate: A reliable tax preparer will always abide by ethical and professional standards and ensure your filings are complete and accurate — and most tax professionals are reliable!

However, “ghost preparers” or other fraudsters have a different goal: employing clever tricks to pilfer bigger refunds and charge more in fees without the taxpayer detecting the ruse until it’s too late.

There are some common red flags and underhanded tactics to watch out for.

Spotting a shady tax preparer

Be on the lookout for tax preparers who:

  • Base Fees on Refund Size: Scammers often promise inflated refunds, then collect payment as a percentage. Legitimate preparers charge fixed, transparent rates.
  • Refuse to Sign Returns: By law, paid preparers must include their IRS-issued PTIN. Ghost preparers omit this to stay hidden in case of an audit.
  • Pressure Clients to Sign Incomplete Forms: Do not sign blank or partially finished returns, as you’re legally attesting to unfinished data.
  • Pad Returns With False Data: Beware preparers who invent bogus deductions like fake charity donations or business expenses to drive larger refunds.
  • Reroute Refunds to Own Accounts: Dishonest preparers may divert IRS refunds from taxpayers into their personal bank accounts. Refunds should only go to clients directly.

Some underhanded tactics that should also sound the alarm bells include:

  • Only Taking Cash Payments: Scammers often demand non-traceable cash payments while refusing to provide receipts for services. This hinders tracking payments tied to returns.
  • Pushing to E-File Returns Prematurely: Unethical e-filers pressure taxpayers into submitting returns littered with errors to beat refund deadlines, hoping mistakes go undetected.
  • Falsely Promising Expedited Refunds: While the IRS issues most refunds within 21 days, scammers incorrectly promise faster payment to secure your business.
  • Suggesting Fabricating Data: Crooked preparers propose inventing fake deductions or income to sway bigger refunds, which constitutes fraud.
  • Concealing Lack of Qualifications: Some scammers withhold that they lack credentials or licenses legally required to file taxes.

How can I vet a tax preparer?

While flagging shady behavior is crucial, proactive vetting is equally vital when searching for a preparer.

Treat the decision as akin to finding a doctor or financial advisor, prioritizing great care in evaluating qualifications, experience, and reputation through:

  • Checking Credentials: Consult the IRS’ Public Directory of Federal Tax Return Preparers to verify PTIN status, credentials (CPA, EA, attorney), and qualifications claimed.
  • Researching Reputability: Search online for reviews, complaints filed, disciplinary actions, and filings for questionable returns.
  • Understanding Fee Structures: Favor fixed over refund-based fees, which motivates inflation. Ask about multi-form discounts and get all quotes in writing beforehand.
  • Interviewing Thoroughly: Ask many questions about their experience, training, specializations, audit support policies, return review procedures, and more before deciding.
  • Confirming Accessibility: Ensure they will remain available to advise after filing season, provide former client references, and have a permanent contact system.
  • Trusting Referrals: Check references from trusted contacts, friends, or local tax specialists familiar with high-integrity preparers.

By being proactive and altogether avoiding unverified strangers hawking tax prep online or via soliciting, taxpayers can find ethical experts while steering clear of scams.

The IRS also provides a wealth of resources about taxpayer rights, reporting fraud, and selecting quality assistance on its website, IRS.gov.

How can I report a bad actor to the IRS?

If you do fall prey to an unscrupulous preparer, promptly reporting them to the Internal Revenue Service is critical, both to reclaim losses and prevent others from victimization.

Gather as much documentation about your experience as possible; items like written receipts, copies of advertisements and business cards, screenshots, and emails all help substantiate your case and increase the likelihood that your complaint will warrant audit inquiries beyond your returns alone.

Then, file your detailed complaint by mailing or faxing a completed Form 14242, Report Suspected Abusive Tax Promotions or Preparers, and any supporting materials to the IRS Lead Development Center in the Office of Promoter Investigations.

Mail:

Internal Revenue Service Lead Development Center

Stop MS5040

24000 Avila Road

Laguna Niguel, CA 92677-3405

Fax: 877-477-9135

Alternatively, taxpayers and tax practitioners may send the information to the IRS Whistleblower Office for possible monetary reward.

For more information, see Abusive Tax Schemes and Abusive Tax Return Preparers.

The IRS and Department of Justice utilize public tips to build cases against bad actors. In fact, since 2001, the IRS has won permanent injunctions against more than 365 fraudulent promoters and preparers.

Taxpayers who come forward with credible documentation do their part in putting investigators on the right trail toward prosecuting scammers.

Pursuing civil settlements or submitting whistleblower claims for monetary rewards through Form 211 are other avenues victims might consider exploring with legal counsel, depending on their circumstances and the financial damages incurred.

The bottom line

Ultimately, you are responsible for what you declare on your tax returns — no matter who completes them. To put it another way, you will be held liable for a fraudulent return submitted under your name, even if you were unaware of the fraud.

That’s why working with an ethical, experienced tax preparer is paramount.

Trust your instincts. If something feels off, do not hesitate to conduct further scrutiny or simply back away before it’s too late. Your sensitive personal and financial data deserves nothing less than the utmost confidence when entrusting it to a tax preparation service.

As experienced professionals, our team at Rosenberg & Chesnov stands ready to offer customized guidance based on your unique tax circumstances and to ensure full compliance, maximize legitimate deductions, and uncover every non-shady opportunity to save.

Would you like some help?

If you are a client and would like to book a consultation, call us at +1 (212) 382-3939 or contact us here to set up a time.

If you aren’t a client, why not? We can take care of your accounting, bookkeeping, tax, and CFO needs so that you don’t have to worry about any of them. Interested? Contact us here to set up a no-obligation consultation.

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