Industry News - Regulatory Updates

March 6, 2012

Some scams, false claims on the rise

Federal officials are warning taxpayers about the rise of a particular scam, encouraging them to fraudulently claim refunds.

Commonly targeting senior citizens and others with little income who do not have a tax filing requirement, those running the scam will contact potential victims and claim they can obtain a tax refund or stimulus through the American Opportunity Tax Credit. This tax break is available to help qualifying students and parents with college expenses.

The IRS has been detecting and stopping an increased number of illegitimate attempts to claim this credit. Fraudsters will typically claim the deduction applies to individuals who went to school in the past, not just those currently paying for it, or otherwise deceive taxpayers into thinking they qualify.

They charge for their "help" in filing claims, the Star-Tribune notes, and have frequently disappeared by the time the scam is brought to light and taxpayers told the truth. As a result, they may avoid prosecution while getting away with victims' money and leaving them to repay an illegitimate refund.

Day traders and other taxpayers should recall that they remain responsible for their own returns even if they have the services of a professional tax preparer. Investigating a professional's credentials or working with a reputable, established accounting firm may help avoid such scams.

According to USA Today, phishing emails that purport to be from tax preparation software companies are also growing more common. These communications may directly ask for financial or personal information that can be used for identity theft, download harmful software onto the taxpayer's computer or contain fake web links that serve a similar purpose.