Beware of Bogus Refund Schemes Abusing Popular College Tax Credit
Targets Include Seniors, Working Families and Church Members
Anchorage - The Internal Revenue Service today warned senior citizens and other taxpayers to beware of an emerging federal tax refund scam tempting victims to file tax returns claiming fraudulent refunds. Bogus refund claims have been identified across the nation with significant pockets of activity in at least six states, including California, Georgia, Michigan, Louisiana, Alabama and Indiana.
These schemes carry a common theme of promising refunds to people who have little or no income, and are normally not required to file a federal income tax return. Promoters falsely claim they can obtain a tax refund or nonexistent stimulus payment for their victims based on the American Opportunity Tax Credit, even if the victim was not enrolled in or paying for college.
Typically, con artists falsely claim that refunds are available even if the victim never went to college, or attended decades ago. In many cases, scammers are targeting seniors, people with very low incomes and members of church congregations with false promises of free money.
“Most of these scams involve promoters who prey upon people in need, building false hopes. When victims’ claims are rejected, their money and the promoters are long gone,” said IRS spokesperson David Tucker. “We want to warn the public to be on guard and stop this new scheme before more innocent people are victimized,” Tucker added.
The IRS has already detected and stopped thousands of these bogus refund claims in recent weeks. The agency is actively investigating the sources of this scheme, and its promoters can be subject to criminal prosecution.
These schemes can be quite costly for victims as promoters may charge exorbitant upfront fees to file their claim. Some promoters of these scams have charged victims $500 for a bogus $1,000 credit. All taxpayers, including those who use paid tax preparers, are legally responsible for the accuracy of their returns, and must repay any refunds received in error, plus any interest and applicable penalties. Those who intentionally try to defraud the government may face criminal prosecution.
Taxpayers should beware of any of the following to avoid becoming ensnared in these schemes:
- Fictitious claims for refunds or rebates based on false statements of entitlement to tax credits.
- Unfamiliar for-profit tax services selling refund and credit schemes to the membership of local churches.
- Internet solicitations that direct individuals to toll-free numbers and then solicit social security numbers.
- Homemade flyers and brochures implying credits or refunds are available without proof of eligibility.
- Offers of free money with no documentation required.
- Promises of refunds for “Low Income – No Documents Tax Returns.”
- Claims for the expired Economic Recovery Credit Program or for economic stimulus payments.
- Unsolicited offers to prepare a return and split the refund.
- Unfamiliar return preparation firms soliciting business from cities outside of the normal business or commuting area.
These refund schemes feature many of the warning signs IRS cautions taxpayers to watch for when choosing a tax preparer. For advice on choosing a competent tax professional, see Tips for Choosing a Tax Return Preparer on IRS.gov. To get the facts on tax benefits related to education, go to the Tax Benefits for Education Information Center on IRS.gov.
Posted: March 6, 2012