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Tax scams target seniors, poor with refund promises

The Internal Revenue Service warned Arizona taxpayers Monday to beware of an emerging tax refund scam tempting victims to file tax returns claiming fraudulent refunds.

These schemes promise refunds to people who have little or no income, and are normally not required to file a federal income tax return, said IRS spokesman Bill Brunson.

The scammers claim they can obtain a tax refund or stimulus payment for their victims based on the American Opportunity Tax Credit, even if the victim was not enrolled in or paying for college, he said in a press release.

Bogus refund claims have been identified across the nation, with significant activity in at least six states, including California, Georgia, Michigan, Louisiana, Alabama and Indiana, Brunson said.

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, he said.

"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," Brunson said.

"We want to warn the public to be on guard and stop this new scheme before more innocent people are victimized," he said.

The IRS has already detected and stopped thousands of these bogus refund claims in recent weeks, Bruson said. The scammers are being investigated, and could be subject to prosecution.

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Many scammers charge "exorbitant upfront fees" to file a claim, he said. Some promoters 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, Brunson said.

According to Brunson, taxpayers should beware 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.

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