The Better Business Bureau is warning about scams targeting taxpayers in Chicago and northern Illinois.
"These scams are spreading and consumers need to understand the risk of financial harm that can occur to them by providing personal information and sending money to scammers," said Steve J. Bernas, president and CEO of the Better Business Bureau serving Chicago and Northern Illinois, in a release from the BBB. "The best protection is suspicion. Don't put your trust in any unknown person who contacts you."
Frequent scams include the following:
• Impersonating IRS agents — Twenty thousand taxpayers have lost over $1 million to fake IRS agents.
• Identity theft — Fraudsters use someone's name and social security number to claim refunds.
• Phishing — Customers receive an email that claims to be from the IRS and asks for personal information. The IRS does not reach out to people using e-mail, texts or social media.
• "Free Money" — Fliers and ads promise free money from the IRS, frequently targeting low-income and elderly people at churches. Victims are told they can claim credits and Social Security rebates that don't exist. Scammers charge fees, then victims can be given a financial penalty for making intentional errors on returns.
• Return preparer fraud — Tax preparers can commit fraud by inventing extra children or stealing identities. All preparers should have an IRS Prepare Tax Identification Number, and should not base fees on the size of a consumer's refund.
• Hiding income offshore — The IRS has collected billions of dollars in back taxes and penalties from taxpayers who have hidden income abroad since 2009.
• Fake charities — Scammers commonly create fake charities to collect money. Before donating to any charity, consumers should verify that an organization is legitimate and that donations will be tax deductible by using the IRS's Exempt Organizations Select Check. Checks or credits cards — not cash — should be used to donate so there is proof of payment.
• Boosting income or expenses — Consumers who are caught falsely inflating income or expenses will have to return fraudulent tax refunds and face penalties.
• Frivolous arguments — Arguments from customers saying their state isn't part of the U.S. or that filing a tax return is voluntary are considered "frivolous arguments" and will be rejected and customers possibly penalized.
• Falsely claiming no income — Schemes can tell taxpayers to falsely report taxable income as zero, but consumers can subsequently be penalized $5,000.
• Evading taxes — Investment advisers and tax preparers create and promote complicated tax structures and shelters that clients can use to evade taxes, involving multiple entities and offshore accounts. These incidents should be reported using Form 14157.
• Abuse of trusts — Some schemes can recommend that consumers transfer money into trusts to avoid taxes. The IRS recommends consulting with a tax professional to avoid illegally using trusts.
The BBB recommends that consumers not give out financial information over the phone or email. People should report scams to the Treasury Inspector General for Tax Administration at (800) 366-4484 or the Federal Trade Commission's FTC Complaint Assistant, the release said.