Notes On Consumer Affairs
“But in this world nothing can be certain, except death and taxes.” So goes the popular saying by Benjamin Franklin, and this time of year it hits a bit closer to home than it usually does. Tax season is upon us again. If you are currently in the process of searching for deductions and filing your taxes, you are not alone. Be forewarned. There are several scams being used that specifically target taxpayers.
According to the New York State Consumer Protection Board (CPB), one of the most prevalent scams directed at taxpayers involves telemarketers who entice New Yorkers with false guarantees about government grants. The telemarketers often tell consumers that there is hidden government money that can be used to pay a variety of household bills, including income taxes. The con artists falsely claim that ordinary people are eligible to receive these government grants, most of which are funded by public assistance programs. In reality these grants are generally reserved for the elderly, the disabled, and people with lower incomes. The scam artists also charge an expensive up-front fee, often in excess of $250, in return for a list of government programs that is in fact available free of charge.
Generally, competitive grants are given to not-for-profit organizations and other charitable institutions. “Grant Action News,” a monthly newsletter published by the New York State Assembly, lists competitive grants offered by New York State. It’s available at www.assembly.state.ny.us. For information on public assistance and additional entitlement programs intended for individuals, please visit the federal government’s website at www.govbenefits.gov.
Some fraudsters have actually been known to claim that the government cannot legally collect income taxes, citing privacy issues, Constitutional loopholes, and possible self-incrimination as defenses. These arguments are false, and have never held up in court. Other scam artists have urged consumers to put their assets in trusts, promising reduced taxable income, decreased estate or gift tax rates, and additional deductions. Since 2001, several promoters and their clients have been prosecuted for this and for similar schemes. To avoid similar complications, taxpayers should consult with a trusted professional before entering into a trust.
Consumers should also pay special attentions should they decide to hire a tax return preparer. Oftentimes preparers attract new customers by promising large refunds, but end up skimming money from the client’s refunds and charging high fees for their services. Shopping around for tax preparation services can help to ensure that you get the most for your money. Friends and family may be able to offer sound recommendations as well. Just remember, if an offer sounds too good to be true, it probably is.
Dishonest tax preparers often scam taxpayers by offering illegal deductions. In one popular scam, the fraudster advises the taxpayer to deduct their entire income as a “necessary expense for the production of income” or “compensation for personal services actually rendered.” In a similar scam, the filers are advised to deduct their adjusted gross income on Schedule A, labeled “Other Miscellaneous Deductions.” Another popular scam, known as the “zero return,” occurs when a scam artist advises the consumer to enter all zeros on their filings. In a variation on this scheme, the filer is directed to enter zero income, report their withholding, and write “nunc pro tunc,” which is Latin for the phrase “now for then,” on their tax return.
For more information on tax scams and other tax-related information, visit the New York State Consumer Protection Board website at www.consumer.state.ny.us or the Internal Revenue Service website at www.irs.gov. If you suspect tax fraud, call the IRS at 1-800-829-0433.