IRS Tax Relief Scams
- Tax scams are everywhere.cuidado con ladrones image by Daniel Calderon from Fotolia.com
Tax relief scams involve convincing a taxpayer that there are shortcuts to either avoid payment of taxes or in receiving a higher tax refund. These scams have more than one victim. The first is the taxpayer, who once the scam is discovered, gets stuck repaying the money received in addition to penalties and fines. The second victim is the U.S. government, and the costs of the investigations get paid by the third victim, the U.S. taxpayers. - "Forty acres and a mule" was a broken promise.donkey image by jjsb88 from Fotolia.com
This scam is based on the unfulfilled promise that the United States made to all slaves who fought for independence alongside the colonial fighters, a promise of 40 acres and a mule for every soldier. The target group for this scam is, of course, the African-American descendants of those who fought in the war. The victim is told that Congress has passed a law granting a tax credit equal to the value of 40 acres and a mule to those descendants.
The scammer often will ask for a fee to fill out the proper paperwork and will guarantee as much as $10,000. Sometimes the IRS will actually cut the check and not catch the victim for as long as a year or more. When they are caught, they become responsible for the amount they were wrongly paid, plus all fines and penalties. - Multilevel marketing is a prime atmosphere to begin a tax scam.Stock Market image by Paul Heasman from Fotolia.com
In the early part of 2000, a multilevel marketing company started turning the concept of a tax relief into its own MLM business. The way this scam worked is by appealing to the idea of keeping more of what we earn from going to the government. Anyone who has spent any amount of time in working a MLM business can attest to the fact that most participants end up losing money. The amount of the loss is then deducted from the adjusted gross income of the taxpayer, resulting in paying less taxes, or in a larger refund.
The victim is encouraged to begin a 'home-based' business (often ending up being the very MLM being pitched), so that everyday expenses for vacations, mileage and more can be deducted with a little creative tax preparation. Sadly, the victim ends up having these deductions disallowed and paying fines and penalties on top of the wrongly received refund amount back. - Tax relief scams victimize many already-cash-strapped citizens.money in hand image by Bruce MacQueen from Fotolia.com
These same "experts" who created the MLM for the somewhat entrepreneurial-minded also created a relief scam for W-2 earners. They claim to be able to reduce the amount of taxes taken from paychecks "immediately." But what they do is fill out a W-4 form and increase the number of exemptions you are claiming. The more exemptions you claim during the year, the less money is taken out for taxes. Second, they check the box marked Advanced Earned Income Credit on the same form. (This will pay out a monthly portion of one's Earned Income Credit during the year instead of one lump sum at the end of the year.) This is something you can do yourself for free, yet they charge $200 for this "service."
What they don't tell you is that doing so will likely end up with you owing taxes at the end of the year. The only thing that really changes is the $200 fee from your pocket to theirs. You can then earn money by convincing others to pay this fee to you for doing the same thing.
