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Many Orange County taxpayers may be anticipating a refund from the IRS this spring. Californians use their refunds for any number of things, including home improvement, paying down debts or making the big purchase they have had their eyes on for a while. Unfortunately, scam artists also look forward to tax season because they hope to defraud honest people out of their hard-earned tax refund.

The IRS has issued a warning after observing thousands of fraudulent tax returns this year. The scammers’ method is simple: They promise big refunds but require taxpayers to give them money beforehand for filing the return. Lured in by the extra cash, many people do not give these charlatans a thorough examination, which would reveal that the scammers attempt to create refunds by claiming credits for which the taxpayers are not eligible. When the IRS informs taxpayers that they will have to give back the refund check, the swindlers have already made off with the upfront payment.

The most common targets of such schemes are senior citizens. Some of the credits that the scammers claim are noticeably inapplicable for that segment of the population. They often claim the American Opportunity Tax Credit, which requires the taxpayer to be funding or enrolled in college. Some scammers even claim the Economic Recovery Credit, which no longer exists.

Fraudulent return schemes are doubly harmful to the taxpayer. Not only do they lose the money they paid to the scam artist to prepare the return, but they face potential IRS consequences. They will have to repay the refund, even if they have already spent it. All taxpayers are responsible for the truth of all statements on their returns, even if they used a paid preparer.

Taxpayers should be extremely wary of preparers who seem to promise something that is too good to be true. An experienced tax attorney can help people avoid such scams and can help those who happen to fall victim to them.

Source: Internal Revenue Service, “Tax Scam Warning: Beware of Phony Refund Scheme Abusing Popular College Tax Credit; Senior Citizens, Working Families and Church Members Are Targets,” IR-2012-29, Mar. 2, 2012.