There are many forms of scams that try to fleece people of their money. Some come in the guise of a tax matter. While the IRS continues to improve its fraud prevention systems, most of the protection must come from the taxpayers themselves.

  1. Social Security Number:
    Never release your Social Security Number or other personal information to anyone who contacts you. The IRS will never call or email a taxpayer asking them to provide their Social Security Number or other personal information. Of course, if you initiate contact with the IRS, the IRS will request that you confirm your identity before the IRS releases information.
  2. Phishing:
    Some scammers will “Phish” around for confidential information through unsolicited emails and fake websites. If you have even a faint suspicion that something is not right, do not respond. The IRS encourages you to report the matter to them at: [email protected]
  3. Refund Fraud:
    Some scammers are filing fake Income Tax Returns on behalf of legitimate taxpayers and collecting refund checks.
  4. Return Preparer:
    The IRS reports that roughly 60% of taxpayers use a tax professional to prepare their Income Tax Returns. The vast majority of tax professionals are honest and protect confidential information. However, some will promise refunds that cannot be legally sustained, have poor controls over protecting confidential information or even affirmatively misuse your confidential information. It is generally safer to hire a tax preparer who is a licensed CPA and/or attorney.
  5. Free Money:
    The expression “To Good To Be True.” should be the first thing that a taxpayer thinks of when they hear or read about some IRS program designed to provide “free money”. There are scammers who prey upon the elderly, low income individuals or church congregations offering “refunds” or “rebates” from the IRS. They make false promises and outright lies while collecting confidential information and fees. By the time that the victims discover the fraud, the scammer is long gone. If fictitious Tax Returns were actually filed (with the knowledge and signature of the “victim”), the “victims” can be hit with interest and stiff penalties.
  6. Nonprofit Organizations:
    To be a Nonprofit Organization, the organization must be validly formed through the laws of one of the 50 states. Some of those Nonprofit Organizations then go on to apply to the IRS to become a Tax Exempt Nonprofit Organization. It is then the job of the IRS to determine whether the organization meets the tests and is qualified.

Not all legitimate Nonprofit Organizations even apply for Tax Exempt status and some that do apply are not approved as being qualified Tax Exempt Nonprofit Organizations by the IRS. Taxpayers are only allowed to deduct contributions to Tax Exempt Nonprofit Organizations specifically approved as being qualified by the IRS.

Beyond tax benefits, there are scammers that do not even operate a legitimate Nonprofit Organization, let alone seek and obtain Tax Exempt status. As an example, it has become common for scammers to try to get money and/or information under the guise of helping victims of disasters where the money never goes to help anyone other than the scammers.

If you are not sure that the organization is legitimate, taxpayers can check the status online with the IRS at IRS.Gov (their Exempt Organizations Select Check) and/or by calling the IRS at (866) 562-5227.

 

 

11/2013

Copyright ©, Keith B. Baker – 2013

This article is designed to be a public resource of general information. It does not constitute “legal advice” nor does it create a “client-attorney” relationship. While the information is intended to be accurate, this cannot be guaranteed. Tax laws are complex and constantly changing as a result of new laws, regulations, court interpretations and IRS pronouncements. Often, there are also various possible interpretations. Further, the applicable rules can be affected by the facts and circumstances of a particular situation. Because of this, some of the information may no longer be correct or may not apply to all situations. We are not responsible for any consequences or losses resulting from your reliance on such information. You are urged to consult an experienced lawyer concerning your particular factual situation and any specific legal questions you may have.

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