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February 14, 2017 By Tax Attorney

IRS Includes Falsifying Income Scam in 2017 List of “Dirty Dozen”

IRS Includes Falsifying Income Scam in 2017 List of “Dirty Dozen”

from the irs.gov website:

WASHINGTON — The Internal Revenue Service today continued issuing its annual list of common tax scams by warning taxpayers to avoid schemes to erroneously claim tax credits. This year’s “Dirty Dozen” includes falsifying income to claim tax credits.

“Taxpayers should ensure all the information they provide on their tax return is accurate,” said IRS Commissioner John Koskinen. “Falsifying income to claim tax credits is against the law. Taxpayers are legally responsible for all the information reported on their tax returns.”

The “Dirty Dozen,” a list compiled annually by the IRS, describes a variety of common scams that taxpayers may encounter. Many of these schemes peak during filing season as people prepare their returns or hire others to help them.

Scams can lead to significant penalties and interest and possible criminal prosecution. IRS Criminal Investigation works closely with the Department of Justice to shutdown scams and prosecute the criminals behind them.

Don’t Make Up Income

Some people falsely increase the income they report to the IRS. This scam involves inflating or including income on a tax return that was never earned, either as wages or self-employment income, usually to maximize refundable credits.

Much like falsely claiming an expense or deduction you did not pay is not right, claiming income you did not earn is also inappropriate. Unscrupulous people do this to secure larger refundable credits such as the Earned Income Tax Credit and it can have serious repercussions. Taxpayers can face a large bill to repay the erroneous refunds, including interest and penalties. In some cases, they may even face criminal prosecution.

Fake Forms 1099-MISC

The IRS cautions taxpayers to avoid getting caught up in scheme disguised as a debt payment option for credit cards or mortgage debt. It involves the filing of a Form 1099-MISC, Miscellaneous Income, and/or bogus financial instruments such as bonds, bonded promissory notes or worthless checks.

Con artists often argue that the proper way to redeem or draw on a fictitious held-aside account is to use some form of made-up financial instrument such as a bonded promissory note that purports to be a debt payment method for credit cards or mortgage debt. Scammers provide fraudulent Form(s) 1099-MISC that appear to be issued by a large bank, loan service and/or mortgage company with which the taxpayer may have had a prior relationship, to further perpetrate the scheme. Form 56, Notice Concerning Fiduciary Relationship, may also be used by participants in this scam to assign fiduciary responsibilities to the lenders.

Taxpayers may encounter unethical return preparers who make them aware of these scams. Remember: Taxpayers are legally responsible for what’s on their tax return even if it is prepared by someone else.

Choose Return Preparers Carefully

It is important to choose carefully when hiring an individual or firm to prepare your return. Well-intentioned taxpayers can be misled by preparers who don’t understand taxes or who mislead people into taking credits or deductions they aren’t entitled to in order to increase their fee. Every year, these types of tax preparers face everything from penalties to jail time for defrauding their clients.

To find tips about choosing a preparer, better understand the differences in credentials and qualifications, research the IRS preparer directory, and learn how to submit a complaint regarding a tax return preparer, visit www.irs.gov/chooseataxpro.

Filed Under: Employment Tax Fraud, IRS Criminal Investigation, Tax Evasion, Tax Fraud Tagged With: false tax credits, tax evasion, tax fraud

January 29, 2016 By Tax Attorney

Richland County, SC man charged with tax evasion

Richland County, SC man charged with tax evasion

The South Carolina Department of Revenue says Christopher Breeden, 34, owes the state more than $7,800 in unpaid taxes.
Breeden was charged Thursday with 6 counts of attempt to evade income taxes, SCDOR said in a news release.
He did not file state tax returns for 2008 and 2009 and 2011 through 2014, SCDOR said.

Breeden allegedly told state officials that “for tax purposes, he was exempt with his employer” from paying taxes on the $276,579 he earned during the six years in question.

If convicted, he could end up paying the state a lot more. He could face up to five years in jail and/or a fine of up to $10,000 on each count.
Breeden was being held at the Alvin S Glenn Detention Center Thursday afternoon.

Read more here: The State
Tax Attorney Joseph Arndt represents clients charged with tax evasion. If you find yourself under investigation for tax evasion, Contact Arndt today.

Filed Under: Employment Tax Fraud, IRS Tax Collections, Tax Evasion Tagged With: tax conviction, tax evasion, tax fraud

March 18, 2015 By Tax Attorney

Employment Tax Fraud

Employment Tax Fraud

Payroll Service Owner Sentenced for Tax Fraud and Embezzlement

On March 16, 2015, in Los Angeles, California, Scott Willsea, an owner of Paycare, Inc., was sentenced to 37 months in prison and ordered to pay $1,873,617 in restitution. Willsea previously pleaded guilty to failure to pay federal payroll taxes intended for the IRS. According to the plea agreement, from at least 2008 through March 2011, Willsea, along with his wife, Isabel, co-owned and operated Paycare, a Riverside-based payroll service. During the 2009 and 2010 tax years, Willsea and Paycare prepared quarterly payroll taxes for at least 15 different client companies for which they failed to account for and pay over to the IRS the full amount of tax due and owed by each company. In at least 35 separate instances, Willsea collected from client companies of Paycare the entire amount they owed the IRS for payroll taxes and failed to pay the IRS the full amount. In each instance, Willsea kept a portion of the money for his own use and benefit.

Filed Under: Employment Tax Fraud Tagged With: employment tax, irs defense, tax fraud

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