The “Dirty Dozen” – Part II: Scams 5-7

May 01, 2014 by Carol Thompson, EA
Handcuffs laying on a 1040 form

Continuing on with Scams 5-7, let’s look at the second set of scams in The Dirty Dozen:


  1. Return Preparer Fraud: Most preparers are honest, and want the best for their clients. Sadly, there are unscrupulous preparers that prey on unsuspecting taxpayers for fraudulent refunds and identity theft. Make sure:
  • You receive a full copy of the return signed by the tax preparer. If you pay a fee for tax preparation and the signature line says “self-prepared,” the return is illegal. The alleged preparer is using an over-the-counter personal tax program that is not allowed for retail use.
  • The preparer entered a Preparer Tax Identification Number, or “PTIN,” in the preparer’s signature area on page 2.
  • You were asked to sign the required Form 8879, IRS e-file Signature Authorization, which allows the return to be filed electronically.
  • Verify that your bank information for direct deposits is the only account listed on the return.
  • You are ultimately responsible for what is on your tax return, including errors and fraud – even if you went to a paid preparer. Read the return before it is filed!
  • To report tax fraud: go to, download Form 14157, Complaint: Tax Return Preparer, fill it out, and send it to the IRS. The form can be ordered by phone at 800-TAX-FORM (800-829-3676).
  1. Hiding Income Offshore: There are far too many individuals who evade taxes by hiding money in “offshore” accounts and use debit cards, credit cards, and wire-transfers to access the money in the United States. The way it works is that someone deposits a large amount of money in an account in a Caribbean bank account. The bank issues a MasterCard which is then used by the individual to purchase merchandise in the United States. The card is paid automatically out of the foreign bank account. The money is effectively “laundered” into the United States without a penny of tax being paid on the income.

    The IRS and the Department of Justice (DOJ) are working diligently to find and prosecute tax evasion cases. Since 2009, tens of thousands of individuals have come forward voluntarily, and many thousands of others have been found due to new treaties with other countries. The IRS has collected billions in back taxes, interest and penalties so far, and expects much more. New treaties for mutual sharing of banking and investment information are being signed by more countries each year, and many more are expected to join the coalition in the future.

  2.  Impersonating Charitable Organizations: One of the most reprehensible scams is that of con artists who set up fake charities to scam money from unsuspecting taxpayers. The scam isn’t found until people report donations on their tax returns for organizations that do not exist. This is especially common after major casualties, such as hurricanes, tornadoes, tsunamis, and other horrific events. To avoid having your money stolen:
  • Donate to recognized charities, such as the Red Cross.
  • Be wary of organizations that sound like familiar charities.
  • Search for the organization at, Exempt Organizations “Select Check,” which allows people to find legitimate, qualified charities. If the organization isn’t on this list, your money isn’t tax deductible.
  • Do not reveal any personal information to solicitors. They do not need your social security number, bank accounts and passwords, or other personal information.
  • Do not give or send anyone cash. Use a check or credit card after verifying the organization. Make sure you get a receipt or letter from the organization, especially if the donation is more than $250.
Watch for Part III. Coming soon!

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