The Top Tax Frauds

March 19, 2017

A look at the IRS list.

Have you heard of the “dirty dozen?” Each year, the IRS lists the top recurring federal tax offenses – frauds, cheats, feints and schemes that ethically challenged taxpayers, tax preparers and crooks try to perpetrate. Watch for these scams in all seasons, not just tax season.

  • Identity theft. Casually discarded or displayed personal information is an open invitation to criminals. Even when we are vigilant, multiple firewalls and strong passwords can fail to protect us.
  • Criminals posing as “tax professionals.” Each year, taxpayers get help with their 1040’s at tax preparation businesses. As the IRS notes, nearly all of these businesses are legitimate. Exceptions do exist; however, sometimes a fraudster will rent a storefront with a mission of collecting SSN’s and other personal information pursuant to claiming phony refunds.
  • Unwarranted or excessive refunds. Annually, some taxpayers and tax preparers claim refunds that are embellished or wholly unjustified. A preparer may tout that it will get you a big refund but then claim a percentage of it. Worse yet, they may ask you to sign a blank return.
  • Phishing. This is tax fraud via email. A scammer will send a message mimicking communication from the IRS or the Electronic Federal Tax Payment System (EFTPS). If you get an email like that, forward it to Neither the IRS nor the EFTPS has a policy of initiating contact with taxpayers through email.
  • Threatening calls. Crooks will sometimes target elders or immigrants with phone scams, pretending to be the IRS or another federal agency. (Sometimes even the caller ID will suggest this.) They will assert that the other party owes thousands in back taxes. The only solution, they contend, is immediate payment through a pre-loaded debit card or a money order. The caller may even know the last four digits of their Social Security Number or volunteer what is supposedly an IRS employee badge number to make the con more believable. A follow-up call from “the DMV” or “the police” may be next. Such behavior can be reported to the Treasury Inspector General for Tax Administration at (800) 366-4484 or the IRS at (800) 829-1040.
  • Sham charities.  A specious charity may ask you for cash, your SSN, your banking information and more. If anything seems fishy, ask for visual proof of the organization’s tax-exempt status, and check it out further at using the Exempt Organizations Select Check search box.
  • Tax shelter schemes. Tax evasion is different from legal tax avoidance. Some unprincipled tax and estate “consultants” seem to confuse the two, much to the chagrin of their clients who run afoul of the IRS. Watch out for aggressively marketed “tax shelters” that seem too good to be true or sketchily detailed.
  • Hiding taxable income. How many taxpayers file fraudulent 1099’s? Any hint of bogus documentation to cut taxes or boost refunds becomes especially egregious when a paid preparer attempts it.
  • Inventing income that was never earned to get credits. The IRS notes that some of the shadier tax prep services sometimes convince clients to try this. It is fairly easy to disprove.
  • Claiming unwarranted fuel tax credits. Few taxpayers can legitimately claim these, yet some try thanks to urging from third-party preparers. Most taxpayers don’t own farms, mining or fishing businesses or companies whose vehicles operate mostly on local roads.
  • Frivolous arguments against income tax. Assorted seminar speakers and books claim that federal taxes are unconstitutional and that Americans have only an implied obligation to pay them.

One thing to remember in light of this list: you are legally responsible for the content input into your 1040 form, even if a third party prepares it.

At HFG Wealth Management, we embrace a holistic method of financial planning known as Financial Life Planning™. We believe this is a financially effective and personally rewarding approach to creating a practical, lasting financial plan. As financial professionals using the life planning approach, our purpose is to assist individuals and families in creating a long-term vision that is consistent with their core values. At HFG we recognize that life events and life transitions can impact your financial responsibilities and your vision of the future. We are here to provide you with tips and strategies to get you started and help you reach your financial and life goals at every stage. For more information, please visit or call 832.585.0110.



Asset Allocation
Investment Review Selection
Portfolio Management
Risk Analysis Management
Tax Impact Analysis
Asset Transition Analysis

Copyright © 2017. HFG Wealth Management, LLC. Investment advisory services offered through HFG Wealth Management, LLC – An independent Registered Investment Advisory firm registered with the SEC. Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. Therefore, any information presented here should only be relied upon when coordinated with individual professional advice. [ more disclosures ]