As per the IRS, they look shady. They lurk in the shadows. They try to entice
                      you with promises of bigger refunds, audit-proof tax breaks or sure ways to
                      beat the IRS. But the only sure thing about them is that they can cause you
                      trouble … a lot of trouble.

                      Defend yourself by reviewing the IRS update of the Dirty Dozen – 12 schemes
                      and scams prowling for victims during tax season. 

                      Check out what IRS agents are finding in their criminal investigations of
                      crooked tax preparers – and their tips for avoiding these characters.
 

                      The IRS urges people to avoid these common schemes:

                     Offshore Transactions. Some people use offshore transactions to avoid
                      paying United States income tax. Use of an offshore credit card, trust or other
                      arrangement to hide or underreport income or to claim false deductions on a
                      federal tax return is illegal.

                      Through April 15, the IRS is offering people with improper offshore financial
                      arrangements a chance to make things right. Eligible taxpayers who step
                      forward will not face civil fraud and information return penalties. A taxpayer
                      involved in these schemes who does not come forward now, however, will be
                      subject to payment of taxes, interest, penalties and potential criminal
                      prosecution.

                      People interested in participating in the program, called the Offshore
                      Voluntary Compliance Initiative, can contact the IRS by calling 215-516-3537
                      (not toll-free).

                     Identity Theft. Identity thieves use someone’s personal data to steal his or
                      her financial accounts, run up charges on the victim’s existing credit cards,
                      apply for new loans, credit cards, services or benefits in the victim’s name and
                      even file fraudulent tax returns.

                      The IRS is aware of at least two recent identity theft scams involving taxes or
                      the IRS. In one, tax preparers allegedly used information, such as Social
                      Security numbers and financial information, from their clients’ tax returns to
                      commit identity theft. In another, fraudsters sent bank customers fictitious
                      bank correspondence and IRS forms in an attempt to trick them into
                      disclosing their personal and banking data.

                      For taxpayers, it pays to be choosy about disclosing personal and financial
                      information. And the IRS encourages taxpayers to carefully select a reputable
                      tax professional.

                     Phony Tax Payment Checks. In this scheme, con artists sell fictitious financial
                      instruments that look like checks to pay a tax liability, mortgage and other
                      debts. The con artists may also counsel their clients to use a phony check to
                      overpay their taxes so they can receive a refund from the IRS for the
                      overpayment. The false checks, called sight drafts, are worthless and have no
                      financial value. It is illegal to use these sight drafts to pay a tax liability or
                      other debts.

                     African-Americans Get a Special Tax Refund. Thousands of African-Americans
                      have been misled by people offering to file for tax credits or refunds related
                      to reparations for slavery. There is no such provision in the tax law. Some
                      unscrupulous promoters have encouraged clients to pay them to prepare a
                      claim for this refund. But the claims are a waste of money. Promoters of
                      reparations tax schemes have been convicted and imprisoned. And taxpayers
                      could face a $500 penalty for filing such claims if they do not withdraw the
                      claim.

                      In early 2002, the slavery reparations scam ranked as the No. 1 scheme on
                      the Dirty Dozen list. Following a sweeping public outreach campaign and
                      assistance from members of the Congressional Black Caucus and other
                      organizations, the number of reparation scam claims fell sharply. Tens of
                      thousands of claims were received in 2001, but the claims fell to less than 50
                      per week in 2002.

                     No Taxes Withheld From Wages. Illegal schemes are being promoted that
                      instruct employers not to withhold federal income tax or employment taxes
                      from wages paid to their employees. These schemes are based on an
                      incorrect interpretation of tax law and have been refuted in court. A recent
                      flurry of court actions has been taken against promoters of these schemes.
                      Taxpayers who have concerns about their employer and employment taxes
                      can get help by calling the IRS at 1-800-829-1040.

                     Improper Home-Based Business. This scheme purports to offer tax “relief”
                      but in reality is illegal tax avoidance. The promoters of this scheme claim that
                      individual taxpayers can deduct most, or all, of their personal expenses as
                      business expenses by setting up a bogus home-based business. But the tax
                      code firmly establishes that a clear business purpose and profit motive must
                      exist in order to generate and claim allowable business expenses.

                     Pay the Tax, Then Get the Prize. The caller says you’ve won a prize, and all
                      you have to do to get it is to pay the income tax due. Don't believe it.
                      Someone who really wins a prize may need to make an estimated tax
                      payment to cover the taxes that will be due at the end of the year. But the
                      payment goes to the IRS – not the caller. Whether the prize is cash, a car or a
                      trip, a legitimate prize giver generally sends both the winner and the IRS a
                      Form 1099 showing the total prize value that should be reported on the
                      winner’s tax return.

                     Frivolous Arguments. Frivolous arguments are false arguments that are
                      unsupported by law. When a scheme promoter says “I don’t pay taxes – why
                      should you” or urges you to “untax yourself for $49.95,” beware. These scams
                      are as old as snake oil, but people continue to be taken in. And now they’re
                      on the Internet. The ads may say that paying taxes is “voluntary,” but that’s
                      just plain wrong. The U.S. courts have continuously rejected this and other
                      frivolous arguments. Unfortunately, hundreds of people across the country
                      have paid for the “secret” of not paying taxes or have bought “untax
                      packages.” Then they find out that following the advice contained in them can
                      result in civil and/or criminal penalties. Numerous sellers of the bogus
                      schemes have been convicted on criminal tax charges.

                     Social Security Tax Scheme. Taxpayers shouldn’t fall victim to a scam offering
                      refunds of the Social Security taxes they have paid during their lifetimes. The
                      scam works by the victim paying a "paperwork" fee of $100, plus a percentage
                      of any refund received, to file a refund claim with the IRS. This hoax fleeces
                      the victims for the up-front fee. The law does not allow such a refund of Social
                      Security taxes paid. The IRS processing centers are alert to this hoax and
                      have been stopping the false claims.

                     "I Can Get You a Big Refund ...for a Fee!" Refund scheme operators may
                      approach someone wanting to "borrow" their Social Security number or give
                      him or her a phony W-2 so it appears that the person qualifies for a big
                      refund. They may promise to split the refund with that person, but the IRS
                      catches most of these false refund claims before they go out. And when one
                      does go out, the participant usually ends up paying back the refund along with
                      stiff penalties and interest. Two lessons to remember: 1) Anyone who
                      promises someone a bigger refund without knowing their tax situation could
                      be misleading them, and 2) Never sign a tax return without looking it over to
                      make sure it’s honest and correct.

                     Share/Borrow EITC Dependents. Unscrupulous tax preparers "share" one
                      client's qualifying children with another client in order to allow both clients to
                      claim the Earned Income Tax Credit. For example, one client may have four
                      children but only needs to list two to get the maximum EITC. The preparer will
                      list two children on the first client’s return and the other two on another client’s
                      tax return. The preparer and the client "selling" the dependents split a fee.
                      The IRS prosecutes the preparers of such fraudulent claims, and participating
                      taxpayers could be subject to civil penalties.

                     IRS “Agent” Comes To Your House To Collect. First, do not let anyone into
                      your home unless they identify themselves to your satisfaction. IRS special
                      agents, field auditors and collection officers carry picture IDs and will normally
                      try to contact you before they visit. If you think the person on your doorstep is
                      an impostor, lock your door and call the local police. To report IRS impostors,
                      call the Treasury Inspector General’s Hotline at 1-800-366-4484. 
                      Beyond the “Dirty Dozen,” the IRS sees many more tax schemes. Some
                      examples include home-based business scams, disabled access credit for pay
                      phones and a variety of improper abusive trusts.

                      “The best advice for taxpayers is to remember the concept of ‘buyer beware,’”
                      Wenzel said. “Think carefully before paying for services or signing important
                      documents. And don’t be fooled by outrageous promises. If something
                      sounds too good to be true, it probably is.”

                      Individual tax information
                      Business Tax Information

                     Author:
                            Let's Get Financial Savvy!, From Debt-Free to Investing
                      With Ease, Founder: MsFy.com, Lecturer: Personal Finance