BIRMINGHAM - The Internal Revenue Service today issued an urgent warning about a tax scam targeting the elderly and others in Alabama.
People are encouraged to be wary if anyone approaches them about filing for a tax refund by somehow using Social Security retirement or disability benefit amounts. Senior citizens and others may be targeted directly by the scam artists or may be encouraged to participate in the scam by citizens who innocently believe it to be legitimate.
The bottom line is this: Retirement or disability benefits received generally cannot be used to generate a legal tax refund. Any such claim filed with the IRS may result in civil or criminal penalties.
Here's what to watch for: The scam artists usually offer, for a fee, to prepare tax returns reporting part or all of your Social Security benefits as taxable income. They may falsely claim some percentage of the benefits as tax withholding or claim the Earned Income Tax Credit, thereby generating a refund.
The scammers often prepare as many as three years worth of false refund claims per person or couple. The victim then files the fraudulent tax returns and may even erroneously receive a refund from the IRS.
However, even if the IRS issues the requested refund, it will demand the money back with interest and perhaps a penalty. By that time, the scam artist has moved on and the victim is out the fees they paid to prepare the false returns.
If you have been a victim of this scam, you should immediately:
-Contact your local law enforcement to report the person to whom you paid the fees for having an illegal tax return prepared.
-File an amended tax return (Form 1040X) to reverse each false return filed.
-Be prepared to pay back any refund you received as a result of a false return, plus penalties and interest.
-Return scam-related refund checks that you have not cashed to the IRS immediately.
If you have questions about how to prepare and file an amended tax return, please contact the IRS toll-free at 1-800-829-1040 or visit www.irs.gov.
The IRS reminds all taxpayers to avoid any tax preparer who claims to know about "secret" tax breaks or loopholes. Remember the old adage: If it sounds too good to be true, it probably is.
The IRS also reminds tax filers that while the IRS aggressively pursues dishonest tax preparers, the taxpayer is responsible for making sure that the information on the tax return is complete and correct.
If you have any doubt as the legality of any tax deduction, credit or refund claim, contact the IRS before you use it. Knowingly filing a false federal tax return can lead to civil penalties or, in some cases, to criminal charges.
The IRS issues an updated list of the most common tax scams each year, called "The Dirty Dozen." To see the list or to learn more about tax scams, visit www.irs.gov.
Taxpayers who want to report suspected tax fraud directly to the IRS may complete Form 3949-A, "Information Referral," and submit it to the IRS. The form is available at www.irs.gov or by calling the IRS forms number toll-free at 1-800-829-3676. This form can be submitted anonymously.