If you receive a call and immediately hear the phrase “Can you hear me?,” hang up. The phrase is used to coax you into saying “yes,” a word that, if said in your voice, is as good as gold for con artists.
RELATED: Common tax scams to look out for
Most Common Tax Scams
Most Common Tax Scams
The IRS recently unveiled the 12 most common tax schemes and scams affecting American taxpayers in 2008.
This year's list is highlighted by Internet phishing scams and several new frivolous tax arguments.
Click through our gallery to see the "Dirty Dozen" schemes that the IRS urges taxpayers to avoid.
Phishing scams often take the form of an e-mail that appears to come from a legitimate source. Some scam e-mails falsely claim to come from the IRS. To date, taxpayers have forwarded more than 33,000 of these scam e-mails, reflecting more than 1,500 different schemes, to the IRS. The IRS never uses e-mail to contact taxpayers about their tax issues.
Some scam artists are trying to trick individuals into revealing information that can be used to access their financial accounts by making promises relating to the economic stimulus payment, often called a "rebate." To obtain the payment, eligible individuals in most cases will not have to do anything more than file a 2007 federal tax return. But some criminals posing as IRS reps are trying to trick taxpayers by falsely telling them they must provide information to get a payment.
Don't believe these outlandish claims: wages are not income; filing a return and paying taxes are merely voluntary; and being required to file Form 1040 violates the Fifth Amendment right against self-incrimination or the Fourth Amendment right to privacy. Taxpayers who file a return or make a submission based on one of these positions are subject to a $5,000 penalty. The "frivolous" list has been updated to include a nonexistent "Mariner's Tax Deduction," among other things.
The IRS is receiving claims for the fuel tax credit that are unreasonable. Some taxpayers, such as farmers who use fuel for off-highway business purposes, may be eligible for the fuel tax credit. But some individuals are claiming the tax credit for nontaxable uses of fuel when their occupation or income level makes the claim unreasonable. Fraud involving the fuel tax credit was recently added to the list of frivolous tax claims.
Individuals continue to try to avoid paying U.S.taxes by illegally hiding income in offshore bank and brokerage accounts or using offshore debit cards, credit cards, wire transfers, foreign trusts, employee leasing schemes, private annuities or life insurance plans.
The IRS is looking for transactions that taxpayers are using to avoid the limitations on contributions to Roth IRAs. Taxpayers should be wary of advisers who encourage them to shift appreciated assets into Roth IRAs or companies owned by their Roth IRAs at less than fair market value. In one variation of the scheme, a promoter has the taxpayer move a highly appreciated asset into a Roth IRA at cost value, which is below annual contribution limits even though the fair market value far exceeds the amount allowed.
Typically, a Form 4852 (Substitute Form W-2) or a "corrected" Form 1099 is used as a way to improperly reduce taxable income to zero. The taxpayer also may submit a statement rebutting wages and taxes reported by a payer to the IRS. Sometimes fraudsters even include an explanation on their Form 4852 that cites statutory language on the definition of wages or may include some reference to a paying company that refuses to issue a corrected Form W-2 for fear of IRS retaliation.
This scam involves a request for abatement of previously assessed tax using Form 843, "Claim for Refund and Request for Abatement." Many individuals who try this have not previously filed tax returns. The tax they are trying to have abated has been assessed by the IRS through the Substitute for Return Program. The filer uses Form 843 to list reasons for the request. Often, one of the reasons given is "Failed to properly compute and/or calculate Section 83-Property Transferred in Connection with Performance of Service."
These scam artists make their money by skimming a portion of their clients' refunds and charging inflated fees for return preparation services. They attract new clients by promising large refunds. Some preparers promote the filing of fraudulent claims for refunds on items such as fuel tax credits to recover taxes paid in prior years. Taxpayers should choose carefully when hiring a tax preparer, especially one who promises something that seems too good to be true.
Some people are going as far as forming domestic shell corporations in certain states for the purpose of disguising the ownership of a business or financial activity. Once formed, these anonymous entities can be used to facilitate underreporting of income, non-filing of tax returns, engaging in listed transactions, money laundering, financial crimes and even terrorist financing. The IRS is working with state authorities to identify these entities and to bring the owners of these entities into compliance.
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. As with other arrangements, taxpayers should seek the advice of a trusted professional before entering into a trust.
The IRS continues to observe the misuse of tax-exempt organizations. Misuse includes arrangements to improperly shield income or assets from taxation, attempts by donors to maintain control over donated assets or income from donated property and overvaluation of contributed property. In addition, IRS examiners are seeing an upturn in instances where taxpayers try to disguise private tuition payments as contributions to charitable or religious organizations.
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Tax Audit Red Flags
If you think you have to be caught stowing away cash in an offshore bank account to trigger an audit, you better think again. One tiny error on your return can have the IRS knocking on your door. In 2007, the IRS audited approximately 1.4 million returns, a 7% increase from 2006 and the highest number on record since 1998.
The person on the other end will be recording the call, and would then use the track of you saying “yes” to access your sensitive information. How? The three-letter word is used frequently by companies to confirm account changes, security settings, and purchases, giving the scammer extensive access to your stuff. Also, be extra careful with these 17 everyday items that could easily be hacked.
To avoid these nefarious calls, be wary of unknown or unrecognizable numbers, always keep your personal information private, and don’t be afraid to question the legitimacy of the caller. Although countering back with “Can YOU hear me now?” may seem like the ideal way to really stick it to the scammer, it’s probably best to resist that urge. (And be sure to watch out for these 10 other phone scams.)
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Telemarketer reveals how to really get rid of a telemarketer
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Interaction gives me the false hope that you may just need some convincing to buy my product. Do not ask any questions. Do not try to explain why you are not interested in the product. Do not show empathy, compassion, or any other human characteristic.
Stay cool -- anger won't help you
Remember, the computer chose your lead—I didn’t. If you scream at me because you’ve gotten called before, it’s likely I’ll just put you back into the lead pool to torture you. If you think I’m being rude, you can ask to speak to a manager. Despite what I might say, every business has a supervisor in the call room. Watch out for these phone call scams that could steal your money.
Say the magic words
The most efficient way to get me to stop calling you requires that you say one sentence: “Please put me on your do-not-call list.” If I ask why, be polite—but firm—and repeat, “I want you to put me on your do-not-call list.”
Seal my fate
Sign up on the National Do Not Call Registry (donotcall.gov), which makes it illegal for companies to contact you more than once. Next, learn how to keep non-humans from calling you with these tricks to prevent robocalls.