IRS warns of tax season scams, frauds

The Internal Revenue Service recently issued its 2008 list of the 12 most egregious tax schemes and scams, highlighted by Internet phishing scams and several frivolous tax arguments.

Topping this year's list of scams is phishing, which encompasses numerous Internetbased ploys to steal financial information from taxpayers.

New to the "Dirty Dozen" this year is a scheme, which IRS auditors discovered, that relates to unreasonable and/or excessive fuel tax credit claims.

Tax schemes can lead to problems for both scam artists and taxpayers.

Tax return preparers and promoters also risk significant penalties, interest and possible criminal prosecution.

The IRS urges taxpayers to avoid these common scams and schemes:

• Phishing - Phishing is a tactic used by Internet-based thieves to trick unsuspecting victims into revealing personal information they can then use to access the victims' financial accounts.

• Scams related to the economic stimulus payment - Some scam artists are trying to trick individuals into revealing personal financial information that can be used to access their financial accounts by making promises relating to the economic stimulus payment, often called a "rebate."

• Frivolous arguments - Promoters of frivolous schemes encourage people to make unreasonable and unfounded claims to avoid paying the taxes they owe.

• Fuel tax credit scams - The IRS is receiving claims for the fuel tax credit that are unreasonable.

• Hiding income offshore.

• Abusive retirement plans - The IRS continues to uncover abuses in retirement plan arrangements, including Roth Individual Retirement Arrangements (IRAs).

• Zero wages - Filing a phony wage- or income-related information return to replace a legitimate information return has been used as an illegal method to lower the amount of taxes owed.

• False claims for refund and requests for abatement - This scam involves a request for abatement of previously assessed tax using Form 843, "Claim for Refund and Request for Abatement."

• Return preparer fraud - Dishonest tax return preparers can cause many problems for taxpayers who fall victim to their schemes.

• Disguised corporate ownership - 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.

• Misuse of trusts - For years, unscrupulous promoters have urged taxpayers to transfer assets into trusts.

• Abuse of charitable organizations and deductions - The IRS continues to observe the misuse of tax-exempt organizations.