Types of Fraud

The definition of "fraud" has a legal (civil & criminal) implications explored in Criminal Actions & Penalties. It is essentially trying to gain an influence over someone by deception.

Taxpayer Fraud

In the 1980's there were a lot of tax scams involving bogus deductions or credits to obtain large refunds as well as the typical tax protestor arguments concerning the Constitution and the nature of Income to avoid liability for taxes. The government won all of those cases.

But, recently, the IRS & many States have been enduring fraudulently filed documents & tax returns. In a typical example, an employer and/or a worker will file false social security numbers & names on Forms 1099MISC with the IRS. The employer claims the deduction & the worker remains undetected. To combat this, the IRS is seeking to mandate the "E-Verify" system of employment.

Another common crime is filing false returns with the IRS, claiming the Earned Income Credit & other "refundable" credits based on falsely stated income to justify the credit. And, sometimes the taxpayer's refund is diverted to another person's bank account, unbeknownst to the taxpayer. The IRS has a whole series of letters & notices they send each year to people about these problems. See ID Theft.

Telephone Fraud

Across the nation there has been an on-going telephone scam where someone will call you & claim they are a "sheriff" from the IRS threatening that unless you pay them with a credit card they are coming to your house to arrest you. The News has reported this widely but it still continues.

First, the IRS doesn't have a "sheriff" - they have a Marshall. Second, the IRS always sends you hate-mail before they take action, as you can see from this website. Third, you can't be arrested in the United States with NO NOTICE of any government action against you. You can hang up the phone on these calls.

The IRS has Form 3949-A to report various types of taxpayer fraud as explained in the website.

Taxpayer Representatives

A very common scam is not from taxpayers defrauding the government but rather "representatives" who defraud taxpayers.

The most famous cases have been JK Harris, Roni Lynn Deutch, & Patrick Cox with TaxMasters. But take a look at these official-looking "notices" from these various "tax representation" companies (Read my comments in Red):

It is obvious they are trying to scare you into believing that 1) the notice is from the government & 2) you are required to call them, neither of which is correct. So, why should you believe anything they say when their first communication with you was fraudulent? They have obtained a copy of the IRS lien which was filed publicly & now are using it against you! BEWARE!

These companies are trying to scare you into calling them & then supplicate you with soothing assurances that they have the magic tax wand which will quickly & easily erase all your tax problems without any effort from you. Many of them demonize the traditional Court methods of tax resolution with guarantees of resolution for "pennies on the dollar".

You may have also see TV ads from various "Tax Ninjas" or "Tax Community Specialists". Read the bottom of the ad closely - they give your case to bidders.

Investigate to Win!

In at least 50% of IRS cases a HUGE mistake has been made on the return or in the process. Many people fail to respond correctly to IRS Notices (because they are so confusing) & they lose. But, with proper investigation, these cases can be reversed & many times the taxpayers receive a refund! Even better, because correcting the problem only requires filing a few documents, the costs are vastly reduced. It's not necessary to engage in long, expensive IRS procedures.

Only an attorney can go to Court. An Attorney is bound by his/her ethical duty to advocate for your interests alone. Your interests don't involve spending a lot of money on IRS procedures which won't work!

So, only an attorney can pursue ALL your remedies in ALL the available forums & make ALL the proper arguments in your favor. The "pennies on the dollar" method these companies are pushing is NOT for everyone. In fact, it is advisable for very few. Plus, it is only ONE method & it is VERY expensive. Anyone who would deceptively ask for your business isn't credible.

Summary

Don't believe everything you hear. Please use this website with all its rich, self-help resources & links but it is not a substitute for individual advocacy on your specific behalf by an experienced tax attorney.