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IR-2019-36, March 12, 2019

WASHINGTON — The Internal Revenue Service today warned taxpayers to avoid falsely inflating deductions or credits on tax returns as part of its 2019 list of the “Dirty Dozen” tax scams.

Taxpayers should watch for areas frequently targeted by unscrupulous tax preparers include overstating deductions such as charitable contributions, medical expenses, padding business expenses or falsely claiming the Earned Income Tax Credit, Child Tax Credit and other tax benefits. Some taxpayers who prepare their own returns, as well as those who use unscrupulous preparers, may also pad their deductions and credits to inflate their refund or lower their tax bill.

Padding deductions and credits is part of this year’s “Dirty Dozen” list of common tax scams. Taxpayers may encounter these schemes any time, but many of them peak during the tax filing season as people prepare their tax returns or hire others to help with their taxes.

The IRS reminds taxpayers that they are still personally at risk, even if someone suggests using these strategies or a paid tax preparer actually prepares their return. By the time the IRS contacts the taxpayer about these problems, the promoter or preparer is often long gone.

Avoids scams, file an accurate return

Preparing an accurate tax return is a taxpayer’s best defense against scams – and the best way to avoid triggering an audit. Significant penalties may apply to those who file incorrect returns including:

• 20 percent of the disallowed amount for filing an erroneous claim for a refund or credit.
• $5,000 if the IRS determines a taxpayer has filed a “frivolous tax return.” This is a return that does not include enough information to figure the correct tax or that contains information clearly showing that the tax reported is substantially incorrect.
• In addition to the full amount of tax owed, a taxpayer could be assessed a penalty of 75 percent of the amount owed if the underpayment on the tax return resulted from tax fraud.

Taxpayers may be subject to criminal prosecution and be brought to trial for actions such as willful failure to file a return; supply information; or pay any tax due; fraud and false statements; preparing and filing a fraudulent return and identity theft.

One way for taxpayers to ensure they file an accurate tax return and claim only the tax benefits they’re eligible to receive is by using tax preparation software. Question and answer formats lead taxpayers through each section of the tax return.

Taxpayers should also remember they can prepare and e-file federal taxes free with IRS Free File. Taxpayers with income of $66,000 or less can file using free brand-name tax software. Those who earned more can use Free File Fillable Forms, the electronic version of IRS paper forms. Either way, everyone has a free e-file option. The only way to access Free File is on IRS.gov.

Community-based volunteers around the country also provide free face-to-face tax assistance to qualifying taxpayers. Volunteers help taxpayers file taxes correctly, claiming only the credits and deductions they’re entitled to by law.

Remember, taxpayers are legally responsible for what is on their tax return, even if it is prepared by someone else.

www.irs.gov/chooseataxpro has additional information to help taxpayers including tips on choosing a preparer, the differences in credentials and qualifications, as well as how to submit a complaint regarding an unscrupulous tax return preparer.

More information about IRS audits, the balance due collection process and possible civil and criminal penalties for noncompliance is available at the IRS website.

*This message was distributed by IRS Tax Tips, an IRS e-mail service. For more information on federal taxes please visit IRS.gov.