Advice from Uncle Sam: Beware the tax scams

If you use a tax preparer that offers to get you an education credit when you haven’t been to school, you’re probably going to learn something you wouldn’t learn any other way.

That’s a lesson, say your friends at the Internal Revenue Service, that will cost you money and get you into trouble.

The short version of the IRS warning is: Don’t.

But this is, after all, tax season, and everybody longs for a large refund. Con men will prey on that desire and push phony deductions or claims for tax credits on victims either to drum up more business or try to get chunks of inflated refunds.

A red flag should wave in your consciousness, said Special Agent Shauna Frye, spokeswoman for IRS Criminal Investigations in Philadelphia, if the preparer wants a percentage of what he tells you he can get for you.

Most legitimate tax preparers, she said, charge flat rates for their services.

Some tax preparers, looking to get word-of-mouth that they can get big tax refunds for their clients, put claims for tax credits on returns without their clients’ knowledge, Frye said.

“For the most part, it’s really just a tool to get more business,” she said. “It’s not the norm.”

The IRS is warning taxpayers, especially senior citizens, to be wary of promises of refunds if they have little or no incomes or don’t normally file tax returns.

Promoters of such schemes, the IRS said in a news release, “claim they can obtain for their victims, often senior citizens, a tax refund or nonexistent stimulus payment based on the American Opportunity Tax Credit, even if the victim was not enrolled in or paying for college.”

“This can be a pretty significant chunk of change,” Frye said.

The IRS said it already has stopped thousands of such fraudulent claims and it is investigating the sources of the con, whose promoters may be subject to criminal prosecution. It’s the victims, however, who are legally responsible for the accuracy of their returns and must repay refunds that are more than they should be.

At some point, Frye said, the IRS is going to find out you weren’t in school.

“This is a disgraceful effort by scam artists to take advantage of people by giving them false hopes of a nonexistent refund,” said IRS Commissioner Doug Shulman. “We want to warn innocent taxpayers about this new scheme before more people get trapped.”

“Typically,” the IRS said, “con artists falsely claim that refunds are available even if the victim went to school decades ago. In many cases, scammers are targeting seniors, people with very low incomes and members of church congregations with bogus promises of free money.”

Another variation is the claim that the college credit can be used to get refunds for taxes paid on groceries.

Here are some clues that a tax preparer wants you to do something not on the up-and-up:

• Unfamiliar for-profit tax services selling refund and credit schemes to the membership of local churches.

• Internet solicitations that direct individuals to toll-free numbers and then solicit Social Security numbers.

• Homemade fliers and brochures implying credits or refunds are available without proof of eligibility.

• Offers of free money with no documentation required.

• Promises of refunds for “Low Income — No Documents Tax Returns.”

• Claims for the expired Economic Recovery Credit Program or for economic stimulus payments.

• Unsolicited offers to prepare a return and split the refund.

• Unfamiliar return-preparation firms soliciting business from cities outside of the normal business or commuting area.

Frye said most tax preparers act responsibly and perform good services for both their clients and the government. For advice on choosing a competent tax professional, see Tips for Choosing a Tax Return Preparer on www.IRS.gov. ••