The Internal Revenue Service has finished releasing its list of the top twelve tax scams for 2015. For the first time, the IRS highlighted one scam a day from January 22nd to February 6th instead of release the entire list at once. This week, it posted a summary of all of the schemes covered on the list. It is now available at: http://www.irs.gov/uac/Newsroom/IRS-Completes-the-Dirty-Dozen-Tax-Scams-for-2015.
Glancing at the list from 2014, it looks pretty similar. Phone scams, phishing and identity theft are all near the top. Taxpayers also need to guard against fraud by unscrupulous return preparers and fake charities seeking money illegitimately.
Offshore tax avoidance is still on the list, although a few years from now it may disappear once FATCA has been implemented. Over the next two years, the IRS will be examining data provided by foreign banks according to the timetables of FATCA in order to look for American taxpayers with income or assets overseas. Under the threat of large penalties, the IRS will have access to an unprecedented amount of information in order to catch offshore tax avoidance. With the possibility of a whistleblowing employee alerting the IRS to violations of FATCA, compliance should be high.
The statistics on tax-related identity theft are troubling and will probably necessitate major reform to IRS practices eventually. From 2011 through October 2014, the IRS has stopped 19 million suspicious returns seeking $63 billion in fraudulent refunds.
Despite its best efforts, the amount is growing quickly.Just two years ago, the number stood at $6.5 billion. By 2016, it is expected to hit $21 billion a year.
Online return software TurboTax has already fallen victim to this practice, as a spike in fraudulent state tax returns from the service forced it to shut down e-filing of state returns temporarily while investigating the problem. Some taxpayers logging onto the system were told by the software that their return had already been submitted. The FBI is now looking into it after an initial investigation by TurboTax found no security breach of its system.
Amid these challenges, the IRS is also dealing with budget cuts. Congress has slashed the IRS budget by more than $1 billion since 2010. The most recent budget cuts caused the agency to hold off spending $200 million on improvements to its information technology, which surely won’t help its efforts to meet the technological demands of the FATCA data and fighting fraudulent returns.
President Obama’s budget proposal calls for an increase of $2 billion next year from its current fiscal 2015 budget of $10.9 billion. However, given the tight budget and Congressional hostility to the agency, this seems unlikely.
If you have questions about this post or have evidence of tax fraud you wish to report to the IRS whistleblower program, contact one of our tax whistleblower lawyers via our contact form or by calling 1-800-590-4116. Our law firm offers a free, confidential initial legal consultation with a lawyer for whistleblowers.