In the wake of disasters like Superstorm Sandy, scammers come out of the woodwork and solicit donations for bogus charities. Some will even impersonate the IRS and contact disaster victims, claiming to be able to help them file casualty loss claims or obtain refunds. Others will steal victims' identities by asking for Social Security numbers and personal information.
Before giving money to a charity, verify that the organization is legitimate and that your donations will be tax deductible by using the IRS's Exempt Organizations Select Check. And don't give cash -- use a check or credit card instead so you'll have proof of payment.
7. Exaggerated income and expenses
Reporting higher income or expenses so that you qualify for bigger refundable credits may sound tempting, but doing this can get you in big trouble with the IRS. If you get caught, you'll have to return any refund you fraudulently received and pay interest and penalties on any amount owed.
8. Refund claims for secret government accounts
If someone tries to convince you to file a 1099-OID to claim money the federal government is allegedly holding in a secret account for U.S. citizens, don't fall for it. The IRS says this is a common scam -- and not only will you not receive a refund, you could face big fines and even jail time.
9. Frivolous arguments
Claiming that filing a tax return is voluntary, that only gold-based money is taxable, or that your state isn't part of the United States won't get you out of paying your taxes. These are considered frivolous arguments and will be swiftly rejected.
10. Pretending to earn zero income
Taxpayers who fall prey to schemes convincing them to file Form 4852 (a substitute W-2 form) or a corrected Form 1099 in order to falsely reduce their taxable income to zero could face a penalty of $5,000.
11. Disguising corporate ownership
The IRS is on the lookout for firms hiding their true identities by using third parties or forming corporations to make it harder for the IRS to figure out who is the true owner. By creating such entities, some businesses underreport income, fail to file tax returns, claim bogus deductions and even launder money.
12. Misuse of trusts
Schemes recommending that you transfer money into trusts to reduce your income and avoid paying taxes are common, and the IRS has seen a growing number of people improperly stashing money in private annuity and foreign trusts. To avoid getting caught up in an illegal trust arrangement, the IRS recommends consulting with a tax professional.