Tax Scams To Look Out For This Year

02/29/2012 04:40pm ET | Updated February 13, 2014

Every year during tax season, scam artists try and break off a piece of Americans' tax payments.

"Scam artists will tempt people in-person, on-line and by e-mail with misleading promises about lost refunds and free money," Internal Revenue Service Commissioner Doug Shulman states. "Don’t be fooled by these scams."

The IRS released a list of the top 12 tax scams to look out for in 2012:

1. Identity theft is a year-round problem, but during tax season the threat is heightened. Scam artists prey on legitimate taxpayers, stealing their identities in order to file tax returns on their behalf and claim refunds, according to the IRS.

In January, the IRS arrested 105 people who stole individuals' identities in order to file fraudulent tax returns.

"The timing is not coincidental," Steven Miller, the IRS's deputy commissioner for services and enforcement, said. "It's the start of tax season, this is a large issue and we want to send a message out there."

2. Phishing is a scam that's all to familiar to many of us. Phishers often lure us in with convincing credentials -- masquerading as a big bank, or during tax season, the IRS -- and try to convince potential victims to provide their most personal information, such as social security numbers and bank routing numbers.

If you receive an email that professes to be from the IRS or an organization linked to the IRS, let the IRS know by emailing

3. Fraudulent tax preparers profit off of the 60 percent of U.S. taxpayers who enlist tax professionals to file their tax returns. Fraudsters take a percentage of their clients' refunds and charge exorbitant rates. Hold your tax preparer accountable by entering his or her Preparer Tax Identification Number on your returns. Refer to the IRS's Tips For Choosing A Tax Preparer before entrusting someone with your most confidential information.

4. Offshore accounts may be used legitimately, but the IRS encourages taxpayers to come forth and volunteer details about offshore bank accounts, brokerage accounts and debit cards to avoid being prosecuted for tax evasion.

In 2009, the IRS launched a program to incentivize full-disclosure of off-shore accounts, telling taxpayers to alert the government of their foreign accounts in exchange for reduced penalties and no jail time. As the IRS continues to crack down on fraudulent accounts, the program has convinced 30,000 people to disclose their foreign accounts, according to the IRS.

5. "Free money" schemes target poor people and the elderly, encouraging victims to file tax returns with limited documentation with the false promise of large refunds and rebates. Victims are left with rejected claims and penalties.

6. Some taxpayers lie about income and expenses in order to qualify for tax breaks such as the Earned Income Tax Credit. If caught, this act will land you with penalties and a bill to make up for the taxes you evaded. You could also be subject to prosecution.

7. Schemers file fake forms to claim credits to which they are not entitled. According to the IRS: "The perpetrator files a fake information return, such as a Form 1099 Original Issue Discount (OID), to justify a false refund claim on a corresponding tax return."

8. Some taxpayers pick fights with the IRS in order to get out of paying certain taxes. Check out this list of frivolous tax arguments that have been deemed false and have been "thrown out in court."

9. "Phony information return" documents -- such as the 4852 form or a "corrected" 1099 form -- are filed by some tax scammers to falsely declare zero taxable wages and limit the tax bill.

10. Inflating charitable deductions is a common tactic used by scam artists to limit taxable income. The IRS says they are "investigating schemes that involve the donation of non-cash assets--including situations in which several organizations claim the full value of the same non-cash contribution.

11. Owners of corporations often disguise their roll in the business by hiding behind a third party. These entities, according to the IRS, "Can be used to underreport income, claim fictitious deductions, avoid filing tax returns, participate in listed transactions and facilitate money laundering, and financial crimes."

12. Look out for people who try to convince you to transfer your money into a trust in order to avoid paying taxes on your income. They IRS says they've "seen an increase in the improper use of private annuity trusts," and advises: "As with other arrangements, taxpayers should seek the advice of a trusted professional before entering a trust arrangement."

For more information, check out the IRS's website.