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Unscrupulous tax preparers may tempt taxpayers into fraud

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  • May 10, 2023

Unscrupulous tax preparers and tax fraud promoters make big promises – and charge high fees – but taxpayers are legally responsible for what’s on their return. Taxpayers should use only reputable tax professionals and know what is on their tax return. Although scammers are most active during filing season, they operate year-round, and taxpayers should always be on the lookout for these abusive schemes.

  • Employee Retention Credit claims – Taxpayers should be aware of aggressive pitches from scammers who promote large refunds related to the Employee Retention Credit. With ads all over the internet, social media and radio, fraudulent promoters try to con ineligible people to claim the credit. These promotions have false information about who’s eligible and how the IRS calculates the credit. Some of these ads exist solely to collect fees from the taxpayer or to take the taxpayer’s personal info and steal their identity.
  • False fuel tax credit claims – The fuel tax credit is meant for off-highway business and farming use and is not available to most taxpayers. Unscrupulous tax return preparers and promoters are enticing taxpayers to inflate their refunds by erroneously claiming the credit.
  • Schemes with international elements – These schemes include a variety of tax evasion strategies including things like:
    • Hiding assets in offshore banks, brokerage accounts, digital asset accounts and nominee entities or in accounts holding digital assets, such as cryptocurrency.
    • Attempting to avoid U.S. tax by contributing to foreign individual retirement arrangements in Malta or potentially other host countries. The participants in these transactions typically lack any local connection to the host country.
    • Participating in a purported insurance arrangement with a Puerto Rican or other foreign corporation in which the U.S. business owner has a financial interest. These arrangements lack many of the attributes of legitimate insurance.

The IRS will challenge the purported tax benefits from these types of transactions and impose penalties. The IRS Criminal Investigation Division is always on the lookout for promoters and participants of these types of schemes. Taxpayers should think twice before including questionable arrangements on their tax returns.

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