How Some Taxpayers Get Snared By Tax-Avoidance Scams

Although most tax preparers are ethical and help ensure their clients file timely and accurate tax returns, a small percentage abuse their position of trust. They may, for example, engage in fraudulent activities that harm taxpayers. The IRS has warned about tax "promoters," which the agency defines as entities that "undermine voluntary compliance by marketing improper methods to reduce the amount of taxes legally owed." Such promoters can expose businesses and individuals to financial and legal risk.

1040 Scam

Wide Variety of Schemes

Some shady tax preparers and promoters encourage clients to submit fraudulent returns and engage in aggressive tax-avoidance schemes. Some tax schemes that you should be aware of include:

In addition to watching out for these schemes, taxpayers should be wary if a preparer charges a fee contingent on the size of a refund. After all, this fee structure provides the preparer with an incentive to artificially inflate tax credits and deductions and underreport income. Tax preparers who don't want to sign a return or appear to sign with someone else's information also merit concern.

Choose the Right Advisor

Some preparers and promoters use the tax code's complexity to perpetrate scams and charge exaggerated fees. If a tax preparer produces a return that generates a significant refund, includes questionable credits or is overly complex and difficult to understand, clients should question it — and the preparer. The existence of these dishonest tax preparers makes it that much more important to engage honest and experienced ones. Contact us for more information and help.

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