Experts warn of tax-time tricks

The start of tax season can be a vulnerable time for taxpayers.

Area business and tax professionals are warning residents about potential scams and letting them know what new measures and waiting periods they should expect when filing their 2012 taxes.

The Better Business Bureau released a list of issues filers should anticipate this tax season.

In some cases, a taxpayer expects a refund and it never comes. A filer calls the Internal Revenue Service to learn someone else has claimed the refund using that person’s Social Security number.

It is important not to release a Social Security number to anyone, even a potential employer, before starting the job, according to the bureau.

In another situation, a taxpayer receives a phone call from someone claiming to be an IRS representative who says the agency made a mistake and owes the taxpayer more money. The caller then asks for the taxpayer’s bank account information to make a direct deposit.

The IRS isn’t making such calls and would never take bank information over the phone, according to the bureau.

A third scenario involves Turbo Tax software and involves an email that appears to come from the company telling a user to download updates to comply with IRS requirements.

In one version, the link downloads a virus that ruins the user’s computer security. In another, the link takes the user to a page asking for personal information that can be used for identity theft.

TurboTax never solicits personal information by email and users can check for any required updates from within the program, according to the bureau.

A final trick involves an email that appears to come from the IRS asking for personal information. Such an email is not valid and should be deleted, according to the BBB.

Ben Jones, special projects manager for Jackson Hewitt locations in the area, thought the BBB list of potential scams was complete, especially examples about emails appearing to be from the IRS.

“The thing to remember about the IRS is that if they really have an issue, they’ll send you a letter,” he said.

The letter will include a legitimate telephone number or the nearest IRS office to visit, he said.

Jones suggested ignoring any emails that claim to be from the IRS. He has seen some clients who have been victims of identity theft and have to use Personal Identification Numbers along with Social Security numbers to file their taxes.

“It used to be a couple instances a year, and now it seems like it’s much more prevalent,” he said.

Jerry Morphis, owner of Accutax and an enrolled agent with the IRS, said it can take up to a year to get a refund from the IRS after identity theft involving the agency has occurred.

Other scams taxpayers should be wary of include a scheme in which a tax preparation business or a group that claims to be one tells black taxpayers there is a new law that says they can collect reparations from slavery, he said.

Morphis said he warned one customer being taken in by the scam there was no such provision, but the man paid a shady tax preparer $250 to file a return that was denied by the IRS.

A common scam is when a criminal sets up a tax office and offers cheap rates.

The preparer tells the taxpayer what the return will be and promises to give the taxpayer the return when it arrives.

The preparer then files the return claiming a fake failed business or other fraudulent claims that make the return a lot higher than the taxpayer was promised.

The preparer takes the check to a partner in a check-cashing business, gives the taxpayer the promised amount in cash and keeps the rest with the taxpayer never knowing.

There is no reason for a tax office to give payment in cash rather than a check, Morphis said.

Many tax tricks, however, are committed by taxpayers against the IRS, he said.

One strategy is for a person with children and no income to say they have an at-home business, such as a day care, to get an earned income tax credit and give a list of expenses and write-offs that don’t exist to bring in a higher tax return, Morphis said.

“That is as common as dirt,” he said.

Another common fraudulent claim is when someone says children have been staying with them for more than six months.

In an effort to better protect itself from fraud and protect filers from the growing problem of identity theft, the IRS is requiring more documentation than ever when taxpayers use tax preparers, Morphis said.

Preparers are required to state what documents they got from taxpayers proving business expenses and the existence of that business. Accutax requires a statement from the people who paid the filer, he said.

Taxpayers also are required to provide documentation of every person living in their home for more than six months, and preparers are required to ask what schools children being claimed attend to make sure that matches up with the areas in which they’re supposed to be living, Morphis said.

Jones said another change taxpayers should expect this year is the IRS is telling taxpayers getting their refunds could take up to 21 days, about a week longer than they were told last year.

Also, regulations on banks following the economic crisis means businesses such as Jackson Hewitt and H&R Block no longer offer refund anticipation loans. That service allowed filers to leave the tax office with cash in hand, rather than waiting for federal refunds, he said.

Other businesses still may offer a similar service, Jones said.

He expects taxes to be filed later than usual for many and urges filers not to wait until the last minute.

Amber Coulter can be reached at (270) 505-1746 or acoulter@thenewsenterprise.com.