1-FALSE Fuel Tax Credit Claims
The fuel tax credit is meant for off-highway business vehicles and farming use and is not available to most taxpayers. However, unscrupulous tax return preparers and social media promoters are enticing taxpayers to inflate their refunds by erroneously claiming the credit. The IRS has seen an increase in audits and held refunds due to the promotion of the fuel credit.
2-BOGUS Business Losses
A discernible trend has been observed wherein individuals, who may not genuinely qualify for low-income tax credits, are strategically positioning themselves within a lower tax bracket through the intentional manipulation of false business expenses. There has been a notable increase in audits and instances of refund denials associated with the inclusion of negative Schedule C losses often presented in disproportionately high amounts that defy logic.
3-PHONY Household Employee Credit Claims
The Household Employees Credit is often misused, particularly by those ineligible, such as independent contractors. This credit is designated for foreign nationals and domestic workers such as nannies. These employees typically work and reside at the private residence in affluent households. Commonly used to defraud the IRS of Self Employment tax, improper use has led to EIC fraud cases, IRS audits, offsets, liens and a 3-year disqualification from the EIC program.
4-SHADY Tax Preparers
Are willing to add anything on your return to convince you to sign, unknowing to the taxpayer. 5 most common warning signs, 1-They offer outrageous size refunds, 2-They charge a fee based on the size of your return instead of by the forms prepared, 3-They use their personal bank acct instead of a 3rd party neutral bank, 4-They don’t go over your return with you, and 5-They may ask for an additional cash back tip after you receive your refund. These types of preparers target low-income taxpayers leaving them with IRS issues and sometimes no refund at all.
5-FABRICATED Home Office Deductions
The oldest one and most audited on the list. This credit was introduced in 1976 and since then has been the most abused and subject to IRS scrutiny. Recordkeeping requirements reveal that your home must be your principal place of business and you must meet clients there regularly or a have a separate on-site structure where you conduct business.
6-UNLICENSED Virtual Individuals Impersonating Tax Preparers
They pop up during tax time typically without an office and only operating virtually. Would you honestly put your money in a bank with no address or location? Where or how are they keeping your most precious personal information secure? Some also prepare your return without their company name or preparer number instead, using “self-prepared” to avoid responsibility. The worst cases result in theft of your entire refund. In conclusion, check for address, company details and verify credentials.
7-FORGED Disproportionate/Excessive Deductions
Excessive Credits or Deductions Relative to Income. For example, making $60,000 income and claiming $40,000 in church donations may trigger scrutiny. These inflated figures and skewed ratios are common red flags, particularly among self-preparers, family members moonlighting as preparers, office-less preparers, and untrustworthy tax professionals.
8-FRAUDULENT Social Media Experts with Bad Advice
Social media “Experts” can circulate inaccurate or misleading tax information, and the IRS has recently seen several examples such as Form 8944. While Form 8944 is real, it is intended for a very limited and specialized group. Many scheming preparers encourage taxpayers to submit false, inaccurate information in hopes of getting a larger refund. Taxpayers should always remember that if something sounds too good to be true, it probably is.
9-SWITCHING dependents
Over the course of 17 years, children claimed as dependents may be swapped multiple times on adult tax returns. Unfortunately, some parents lend their children to relatives, friends, or acquaintances, triggering a reaction when the computer detects inconsistencies in paired social security numbers. This prompts the system to issue an automated letter requesting proof.
10-Some are just random and you have done nothing wrong
Random selections and you are not at fault. The computer just picks some out the bunch