Self Employed? Check Out These IRS Tax Tips

From the IRS –

Self Employed? Check Out These IRS Tax Tips

If you are self-employed, you normally carry on a trade or business. Sole proprietors and independent contractors are two types of self-employment. If this applies to you, there are a few basic things you should know about how your income affects your federal tax return. Here are six important tips from the IRS:

  • SE Income. Self-employment can include income you received forpart-time work. This is in addition to income from your regular job.
  • Schedule C or C-EZ. You must file a Schedule C, Profit or Loss from Business, or Schedule C-EZ, Net Profit from Business, with your Form 1040. You may use Schedule C-EZ if you had expenses less than $5,000 and meet certain other conditions. See the form instructions to find out if you can use the form.
  • SE Tax. You may have to pay self-employment tax as well as income tax if you made a profit. Self-employment tax includes Social Security and Medicare taxes. Use Schedule SE, Self-Employment Tax, to figure the tax. If you owe this tax, attach the schedule to your federal tax return.
  • Estimated Tax. You may need to make estimated tax payments. Try IRS Direct Pay. People typically make these payments on income that is not subject to withholding. You usually pay estimated taxes in four annual installments. If you do not pay enough tax throughout the year, you may owe a penalty.
  • Allowable Deductions. You can deduct expenses you paid to run your business that are both ordinary and necessary. An ordinary expense is one that is common and accepted in your industry. A necessary expense is one that is helpful and proper for your trade or business.
  • When to Deduct. In most cases, you can deduct expenses in the same year you paid, or incurred them. However, you must ‘capitalize’ some costs. This means you can deduct part of the cost over a number of years.

Visit the Small Business and Self-Employed Tax Center on IRS.gov for all your federal tax needs. You can also get IRS tax forms on IRS.gov/formsanytime.

The IRS “Dirty Dozen” List of Tax Scams for 2016

From the IRS –

IRS Wraps Up the “Dirty Dozen” List of Tax Scams for 2016

 

WASHINGTON — The Internal Revenue Service today wrapped up its annual “Dirty Dozen” list of tax scams with identity theft topping this year’s list but with phone scams and phishing schemes also deserving special mention. Taxpayers need to guard against any ploys to steal their personal information, scam them out of money or talk them into engaging in questionable behavior with their taxes.

During the past year, as part of the Security Summit initiative, the IRS partnered with states and the tax industry to enhance coordination and create a more secure system for taxpayers. Participants now regularly share details of fraudulent schemes detected so both industry and government can provide increased protection. Many enhancements are invisible to taxpayers.

“We are working hard to protect taxpayers from identity theft and other scams this filing season,” said IRS Commissioner John Koskinen. “Taxpayers have rights and should not be frightened into providing personal information or money to someone over the phone or in an email. We urge taxpayers to help protect themselves from scams — old and new.”

This is the second year the IRS has highlighted its Dirty Dozen list in separate releases over 12 business days. Taxpayers are encouraged to review the list in a special section on IRS.gov and be on the lookout for these scams. Many of these con games peak during filing season as people prepare their tax returns or hire someone to do so.

The IRS this week also renewed a consumer alert for e-mail schemes after seeing an approximate 400 percent surge in phishing and malware incidents so far this tax season. (IR-2016-28)

Perpetrators of illegal scams can face significant penalties and interest and possible criminal prosecution. IRS Criminal Investigation works closely with the Department of Justice to shut down scams and prosecute the criminals behind them. Taxpayers should remember that they are legally responsible for what is on their tax return even if it is prepared by someone else. Be sure the preparer is up to the task. For more see the Choosing a Tax Professional page.

Here is a recap of this year’s “Dirty Dozen” scams:

Identity Theft: Taxpayers need to watch out for identity theft especially around tax time. The IRS continues to aggressively pursue the criminals that file fraudulent returns using someone else’s Social Security number. Though the agency is making progress on this front, taxpayers still need to be extremely careful and do everything they can to avoid being victimized. (IR-2016-12)

Phone Scams: Phone calls from criminals impersonating IRS agents remain an ongoing threat to taxpayers. The IRS has seen a surge of these phone scams in recent years as scam artists threaten taxpayers with police arrest, deportation and license revocation, among other things. (IR-2016-14)

Phishing: Taxpayers need to be on guard against fake emails or websites looking to steal personal information. The IRS will never send taxpayers an email about a bill or refund out of the blue. Don’t click on one claiming to be from the IRS.Be wary of strange emails and websites that may be nothing more than scams to steal personal information. (IR-2016-15)

Return Preparer Fraud: Be on the lookout for unscrupulous return preparers. The vast majority of tax professionals provide honest high-quality service. But there are some dishonest preparers who set up shop each filing season to perpetrate refund fraud, identity theft and other scams that hurt taxpayers. Legitimate tax professionals are a vital part of the U.S. tax system. (IR-2016-16)

Offshore Tax Avoidance: The recent string of successful enforcement actions against offshore tax cheats and the financial organizations that help them shows that it’s a bad bet to hide money and income offshore. Taxpayers are best served by coming in voluntarily and getting caught up on their tax-filing responsibilities. The IRS offers the Offshore Voluntary Disclosure Program (OVDP) to enable people catch up on their filing and tax obligations. (IR-2016-17)

Inflated Refund Claims: Taxpayers need to be on the lookout for anyone promising inflated refunds. Be wary of anyone who asks taxpayers to sign a blank return, promises a big refund before looking at their records, or charges fees based on a percentage of the refund. Scam artists use flyers, advertisements, phony store fronts and word of mouth via community groups where trust is high to find victims. (IR-2016-18)

Fake Charities: Be on guard against groups masquerading as charitable organizations to attract donations from unsuspecting contributors. Be wary of charities with names similar to familiar or nationally-known organizations. Contributors should take a few extra minutes to ensure their hard-earned money goes to legitimate and currently eligible charities. IRS.gov has the tools taxpayers need to check out the status of charitable organizations. (IR-2016-20)

Falsely Padding Deductions on Returns: Taxpayers should avoid the temptation of falsely inflating deductions or expenses on their returns to under pay what they owe or  possibly receive larger refunds. Think twice before overstating deductions such as charitable contributions and business expenses or improperly claiming such credits as the Earned Income Tax Credit or Child Tax Credit. (IR-2016-21)

Excessive Claims for Business Credits: Avoid improperly claiming the fuel tax credit, a tax benefit generally not available to most taxpayers. The credit is generally limited to off-highway business use, including use in farming. Taxpayers should also avoid misuse of the research credit. Improper claims generally involve failures to participate in or substantiate qualified research activities and/or satisfy the requirements related to qualified research expenses. (IR-2016-22)

Falsifying Income to Claim Credits: Don’t  invent income to erroneously qualify for tax credits, such as the Earned Income Tax Credit. Taxpayers are sometimes talked into doing this by scam artists. Taxpayers are best served by filing the most-accurate return possible because they are legally responsible for what is on their return. This scam can lead to taxpayers facing big bills to pay back taxes, interest and penalties. In some cases, they may even face criminal prosecution. (IR-2016-23)

Abusive Tax Shelters: Don’t use abusive tax structures to avoid paying taxes. The IRS is committed to stopping complex tax avoidance schemes and the people who create and sell them. The vast majority of taxpayers pay their fair share, and everyone should be on the lookout for people peddling tax shelters that sound too good to be true. When in doubt, taxpayers should seek an independent opinion regarding complex products they are offered. (IR-2016-25)

Frivolous Tax Arguments: Don’t use frivolous tax arguments in an effort to avoid paying tax. Promoters of frivolous schemes encourage taxpayers to make unreasonable and outlandish claims Even though they are wrong and have been repeatedly thrown out of court. While taxpayers have the right to contest their tax liabilities in court, no one has the right to disobey the law or disregard their responsibility to pay taxes. The penalty for filing a frivolous tax return is $5,000. (IR-2016-27)

New Surge in IRS E-mail Schemes

From the IRS –

Consumers Warned of New Surge in IRS E-mail Schemes during 2016 Tax Season; Tax Industry Also Targeted

WASHINGTON – The Internal Revenue Service renewed a consumer alert for e-mail schemes after seeing an approximate 400 percent surge in phishing and malware incidents so far this tax season.

The emails are designed to trick taxpayers into thinking these are official communications from the IRS or others in the tax industry, including tax software companies. The phishing schemes can ask taxpayers about a wide range of topics. E-mails can seek information related to refunds, filing status, confirming personal information, ordering transcripts and verifying PIN information.

Variations of these scams can be seen via text messages, and the communications are being reported in every section of the country.

“This dramatic jump in these scams comes at the busiest time of tax season,” said IRS Commissioner John Koskinen. “Watch out for fraudsters slipping these official-looking emails into inboxes, trying to confuse people at the very time they work on their taxes. We urge people not to click on these emails.”

This tax season the IRS has observed fraudsters more frequently asking for personal tax information, which could be used to help file false tax returns.

When people click on these email links, they are taken to sites designed to imitate an official-looking website, such as IRS.gov. The sites ask for Social Security numbers and other personal information. The sites also may carry malware, which can infect people’s computers and allow criminals to access your files or track your keystrokes to gain information.

The IRS has seen an increase in reported phishing and malware schemes, including:

  • There were 1,026 incidents reported in January, up from 254 from a year earlier.
  • The trend continued in February, nearly doubling the reported number of incidents compared to a year ago. In all, 363 incidents were reported from Feb. 1-16, compared to the 201 incidents reported for the entire month of February 2015.
  • This year’s 1,389 incidents have already topped the 2014 yearly total of 1,361, and they are halfway to matching the 2015 total of 2,748.

“While more attention has focused on the continuing IRS phone scams, we are deeply worried this increase in email schemes threatens more taxpayers,” Koskinen said. “We continue to work cooperatively with our partners on this issue, and we have taken steps to strengthen our processing systems and fraud filters to watch for scam artists trying to use stolen information to file bogus tax returns.”

As the email scams increase, the IRS is working on this issue through the Security Summit initiative with state revenue departments and the tax industry. Many software companies, tax professionals and state revenue departments have seen variations in the schemes.

For example, tax professionals are also reporting phishing scams that are seeking their online credentials to IRS services, for example the IRS Tax Professional PTIN System. Tax professionals are also reporting that many of their clients are seeing the e-mail schemes.

As part of the effort to protect taxpayers, the IRS has teamed up with state revenue departments and the tax industry to make sure taxpayers understand the dangers to their personal and financial data as part of the “Taxes. Security. Together” campaign.

If a taxpayer receives an unsolicited email that appears to be from either the IRS e-services portal or an organization closely linked to the IRS, report it by sending it to phishing@irs.gov.  Learn more by going to the Report Phishing and Online Scams page.

It is important to keep in mind the IRS generally does not initiate contact with taxpayers by email to request personal or financial information. This includes any type of electronic communication, such as text messages and social media channels. The IRS has information online that can help protect taxpayers from email scams.

Phishing and malware schemes again made the IRS “Dirty Dozen” tax scam list this year. Check out the last IRS Phishing Scam news release for more info.

What to look for in these scams

Taxpayers receive an official-looking email from what appears to be an official source, whether the IRS or someone in the tax industry.

The underlying messages frequently ask taxpayers to update important information by clicking on a web link. The links may be masked to appear to go to official pages, but they can go to a scam page designed to look like the official page. The IRS urges people not to click on these links but instead send the email to phishing@irs.gov.

Recent email examples the IRS has seen include subject lines and underlying text referencing:

  • Numerous variations about people’s tax refund.
  • Update your filing details, which can include references to W-2.
  • Confirm your personal information.
  • Get my IP Pin.
  • Get my E-file Pin.
  • Order a transcript.
  • Complete your tax return information.

Numbers provided are for phishing and malware incidents combined.

Change Your Name? It Can Affect Your Taxes

From the IRS –

Change Your Name?  It Can Affect Your Taxes

A name change can have an impact on your taxes. All the names on your tax return must match Social Security Administration records. A name mismatch can delay your refund. Here’s what you should know if you changed your name:

  • Report Name Changes.  Did you get married and are now using your new spouse’s last name or hyphenated your last name? Did you divorce and go back to using your former last name? In either case, you should notify the SSA of your name change. That way, your new name on your IRS records will match up with your SSA records.
  • Make Dependent’s Name Change.  Notify the SSA if your dependent had a name change. For example, this could apply if you adopted a child and the child’s last name changed.

If you adopted a child who does not have a Social Security number, you may use an Adoption Taxpayer Identification Number on your tax return. An ATIN is a temporary number. You can apply for an ATIN by filing Form W-7A, Application for Taxpayer Identification Number for Pending U.S. Adoptions, with the IRS. You can visit IRS.gov to view, download, print or order the form at any time.

  • Get a New Card.  File Form SS-5, Application for a Social Security Card, to notify SSA of your name change. You can get the form onSSA.gov or call 800-772-1213 to order it. Your new card will show your new name with the same SSN you had before.
  • Report Changes in Circumstances when they happen. If you enrolled in health insurance coverage through the Health Insurance Marketplace you may receive the benefit of advance payments of thepremium tax credit. These are paid directly to your insurance company to lower your monthly premium. Report changes in circumstances, such as a name change, a new address and a change in your income or family size to your Marketplace when they happen throughout the year. Reporting the changes will help you avoid getting too much or too little advance payment of the premium tax credit.

Each and every taxpayer has a set of fundamental rights they should be aware of when dealing with the IRS. These are your Taxpayer Bill of Rights. Explore your rights and our obligations to protect them on IRS.gov.

Understanding the Small Business Health Care Tax Credit

From the IRS –

Understanding the Small Business Health Care Tax Credit

The Affordable Care Act includes the small business health care tax credit, which can benefit small employers who provide health coverage for their employees.

The small business health care tax credit benefits employers who:

  • have fewer than 25 full-time equivalent employees
  • pay an average wage of less than $51,600 a year
  • pay at least half of employee health insurance premiums

Here are some facts that will help you understand this tax credit and how it may affect your small business or tax-exempt organization:

  • Credit percentage is 50 percent of employer-paid premiums; for tax-exempt employers, the percentage is 35 percent.
  • Small employers may claim the credit for only two consecutive taxable years beginning in tax year 2014 and beyond.
  • For 2015, the credit is phased out beginning when average wages equal $25,800 and is fully phased out when average wages exceed $51,600. The average wage phase out is adjusted annually for inflation.
  • Generally, small employers are required to purchase a Qualified Health Plan from a Small Business Health Options Program Marketplace to be eligible to claim the credit.  Transition relief from this requirement is available to certain small employers.

Small employers may still be eligible to claim the tax credit for tax years prior to 2014.   Employers who were eligible to claim this credit for prior years – but did not do so – may consider if they are still eligible to amend prior year returns in order to claim the credit.

Gathering the following information will assist you in completing Form 8941, Credit for Small employer Health Insurance Premiums.

  • SHOP QHP documentation or letter of eligibility from SHOP, unless transition relief applies
  • Numbers of full-time and part-time employees and numbers of hours worked
  • Average annual wages for employees
  • Employer premiums paid per employee, if applicable
  • Relevant K-1s and other pass-through credit information
  • Cost of coverage for each employee
  • Payroll tax liability – for tax-exempt organizations only
  • Pass-through credit info – for K-1s of other small employers

For more information about the Affordable Care Act visit IRS.gov/aca.

Income-Based Health Coverage Exemptions

From the IRS –

Find Out More about Income-Based Health Coverage Exemptions

The individual shared responsibility provision requires you and each member of your family to have health care coverage, have an exemption from the coverage requirement, or make an individual shared responsibility payment for any month without coverage or an exemption when you file your federal income tax return.

You do not need to file a return solely to report your coverage or to claim an exemption if you are not otherwise required to file.

If you are not filing a federal income tax return because your gross income is below your return filing threshold, you are automatically exempt from the shared responsibility provision for that year. You do not need to file a tax return to claim an exemption from coverage and you should not make an individual shared responsibility payment.

If you are not required to file a tax return for a year but choose to file one anyway, you should claim the coverage exemption on Form 8962, Health Coverage Exemptions, when you file your tax return.

To learn more about coverage exemptions, visit IRS.gov/aca, or use our interactive tool, Am I Eligible for a Coverage Exemption or Required to Make an Individual Shared Responsibility Payment?

Beware of Abusive Tax Shelters

From the IRS –

Abusive Tax Shelters Again on the IRS “Dirty Dozen” List of Tax Scams for the 2016 Filing Season

WASHINGTON — The Internal Revenue Service today said using abusive tax shelters and structures to avoid paying taxes continues to be a problem and remains on its annual list of tax scams known as the “Dirty Dozen” for the 2016 filing season.

“Taxpayers should steer clear of unscrupulous promoters who sell phony tax shelters with no real purpose other than to avoid paying what is owed,” said IRS Commissioner John Koskinen. “These schemes can end up costing taxpayers more in back taxes, penalties and interest than they saved in the first place.”

Compiled annually, the “Dirty Dozen” lists a variety of common scams that taxpayers may encounter anytime but many of these schemes peak during filing season as people prepare their returns or hire people to help with their taxes.

Illegal scams can lead to significant penalties and interest and possible criminal prosecution. IRS Criminal Investigation works closely with the Department of Justice (DOJ) to shut down scams and prosecute the criminals behind them.

Abusive Tax Structures

Abusive tax schemes have evolved from simple structuring of abusive domestic and foreign trust arrangements into sophisticated strategies that take advantage of the financial secrecy laws of some foreign jurisdictions and the availability of credit/debit cards issued from offshore financial institutions.

IRS Criminal Investigation (CI) has developed a nationally coordinated program to combat these abusive tax schemes. CI’s primary focus is on the identification and investigation of the tax scheme promoters as well as those who play a substantial or integral role in facilitating, aiding, assisting, or furthering the abusive tax scheme, such as accountants or lawyers. Just as important is the investigation of investors who knowingly participate in abusive tax schemes.

Multiple flow-through entities are commonly used as part of a taxpayer’s scheme to evade taxes. These schemes may use Limited Liability Companies (LLCs), Limited Liability Partnerships (LLPs), International Business Companies (IBCs), foreign financial accounts, offshore credit/debit cards and other similar instruments. They are designed to conceal the true nature and ownership of the taxable income and/or assets.

Whether something is “too good to be true” is important to consider before buying into any arrangements that promise to “eliminate” or “substantially reduce” your tax liability.  If an arrangement uses unnecessary steps or a form that does not match its substance, then that arrangement is an abusive scheme.  Another thing to remember is that the promoters of abusive tax schemes often employ financial instruments in their schemes; however, the instruments are used for improper purposes including the facilitation of tax evasion.

The IRS encourages taxpayers to report unlawful tax evasion. Where Do You Report Suspected Tax Fraud Activity?

Misuse of Trusts

Trusts also commonly show up in abusive tax structures. They are highlighted here because unscrupulous promoters continue to urge taxpayers to transfer large amounts of assets into trusts. These assets include not only cash and investments, but also successful on-going businesses. There are legitimate uses of trusts in tax and estate planning, but the IRS commonly sees highly questionable transactions. These transactions promise reduced taxable income, inflated deductions for personal expenses, reduced (even to zero) self-employment taxes, and reduced estate or gift transfer taxes.

These transactions commonly arise when taxpayers are transferring wealth from one generation to another. Questionable trusts rarely deliver the tax benefits promised and are used primarily as a means of avoiding income tax liability and hiding assets from creditors, including the IRS.

IRS personnel continue to see an increase in the improper use of private annuity trusts and foreign trusts to shift income and deduct personal expenses, as well as to avoid estate transfer taxes. As with other arrangements, taxpayers should seek the advice of a trusted professional before entering a trust arrangement.

Captive Insurance

Another abuse involving a legitimate tax structure involves certain small or “micro” captive insurance companies.  Tax law allows businesses to create “captive” insurance companies to enable those businesses to protect against certain risks. The insured claims deductions under the tax code for premiums paid for the insurance policies while the premiums end up with a captive insurance company owned by the owners of the insured or family members.

The captive insurance company, in turn, can elect under a separate section of the tax code to exclude up to $1.2 million of its net premium income per year, so that the captive is taxed only on its investment income.

In the abusive structure, unscrupulous promoters, accountants, or wealth planners persuade the owners of closely held entities to participate in these schemes.  The promoters assist the owners to create captive insurance companies onshore or offshore and cause the creation and sale of the captive “insurance” policies to the closely held entities.  The policies may cover ordinary business risks or esoteric, implausible risks for exorbitant “premiums,” while the insureds continue to maintain their far less costly commercial coverages with traditional insurers.  Captive “insurance” policies may attempt to cover the same risks as are covered by the entities’ existing commercial coverage, but the captive policies’ “premiums” may be double or triple the premiums of the policy owners’ commercial policies.

Annual premium amounts are frequently targeted to the amounts of deductions business entities seek in order to reduce their taxable income. In these abusive schemes, total premiums can equal up to $1.2 million annually to take full advantage of the premium income exclusion provision.  Underwriting and actuarial substantiation for the insurance premiums paid are either absent or illusory.  The promoters manage the entities’ captive insurance companies for substantial fees, assisting taxpayers unsophisticated in insurance, to continue the charade from year to year.

The Protecting Americans from Tax Hikes Act of 2015 reins in certain of the micro captive abuses that the IRS is currently combatting.  Those provisions are effective for small insurance companies’ taxable years beginning after Dec. 31, 2016.

What You Need to Know about Taxable and Non-Taxable Income

From the IRS –

What You Need to Know about Taxable and Non-Taxable Income

All income is taxable unless a law specifically says it isn’t. Here are some basic rules you should know to help you file an accurate tax return:

  • Taxable income.  Taxable income includes money you earn, like wages and tips. It also includes bartering, an exchange of property or services. The fair market value of property or services received is normally taxable.

Some types of income are not taxable except under certain conditions, including:

  • Life insurance.  Proceeds paid to you upon the death of an insured person are usually not taxable. However, if you redeem a life insurance policy for cash, any amount you get that is more than the cost of the policy is taxable.
  • Qualified scholarship.  In most cases, income from a scholarship is not taxable. This includes amounts used for certain costs, such as tuition and required books. On the other hand, amounts you use for room and board are taxable.
  • Other income tax refunds.  State or local income tax refunds may be taxable. You should receive a Form 1099-G from the agency that paid you. They may have sent the form by mail or electronically. Contact them to find out how to get the form. Report any taxable refund you got even if you did not receive Form 1099-G.

Here are some items that are usually not taxable:

  • Gifts and inheritances
  • Child support payments
  • Welfare benefits
  • Damage awards for physical injury or sickness
  • Cash rebates from a dealer or manufacturer for an item you buy
  • Reimbursements for qualified adoption expenses

For more on this topic see Publication 525, Taxable and Nontaxable Income. You can get it at IRS.gov/forms anytime.

Each and every taxpayer has a set of fundamental rights they should be aware of when dealing with the IRS. These are your Taxpayer Bill of Rights. Explore your rights and our obligations to protect them on IRS.gov.

IRS YouTube Videos:

IRS Podcasts:

Your Social Security Benefits May be Taxable

From the IRS –

Your Social Security Benefits May be Taxable

If you receive Social Security benefits, you may have to pay federal income tax on part of your benefits. These IRS tips will help you determine if you need to pay taxes on your benefits.

  • Form SSA-1099.  If you received Social Security benefits in 2015, you should receive a Form SSA-1099, Social Security Benefit Statement, showing the amount of your benefits.
  • Only Social Security.  If Social Security was your only income in 2015, your benefits may not be taxable. You also may not need to file a federal income tax return. If you get income from other sources you may have to pay taxes on some of your benefits.
  • Tax Formula.  Here’s a quick way to find out if you must pay taxes on your Social Security benefits: Add one-half of your Social Security to all your other income, including tax-exempt interest. Then compare the total to the base amount for your filing status. If your total is more than the base amount, some of your benefits may be taxable.
  • Base Amounts.  The three base amounts are:
    • $25,000 – if you are single, head of household, qualifying widow or widower with a dependent child or married filing separately and lived apart from your spouse for all of 2015
    • $32,000 – if you are married filing jointly
    • $0 – if you are married filing separately and lived with your spouse at any time during the year

Each and every taxpayer has a set of fundamental rights they should be aware of when dealing with the IRS. These are your Taxpayer Bill of Rights. Explore your rights and our obligations to protect them on IRS.gov.

Additional IRS Resources:

IRS YouTube Videos:

Fake Charities Are a Problem

From the IRS –

Fake Charities Are a Problem and on the IRS Dirty Dozen List of Tax Scams for 2016

IR-2016-20, Feb. 2016

WASHINGTON — The Internal Revenue Service today warned taxpayers about groups masquerading as charitable organizations to attract donations from unsuspecting contributors, one of the “Dirty Dozen” for the 2016 filing season.

“Fake charities set up by scam artists to steal your money or personal information are a recurring problem,” said IRS Commissioner John Koskinen. “Taxpayers should take the time to research organizations before giving their hard-earned money.”

Compiled annually, the “Dirty Dozen” lists a variety of common scams that taxpayers may encounter anytime, but many of these schemes peak during filing season as people prepare their returns or hire someone to prepare their taxes.

Perpetrators of illegal scams can face significant penalties and interest and possible criminal prosecution. IRS Criminal Investigation works closely with the Department of Justice to shut down scams and prosecute the criminals behind them.

The IRS offers these basic tips to taxpayers making charitable donations:

  • Be wary of charities with names that are similar to familiar or nationally known organizations. Some phony charities use names or websites that sound or look like those of respected, legitimate organizations. IRS.gov has a search feature, Exempt Organizations Select Check, which allows people to find legitimate, qualified charities to which donations may be tax-deductible. Legitimate charities will provide their Employer Identification Numbers (EIN), if requested, which can be used to verify their legitimacy through EO Select Check. It is advisable to double check using a charity’s EIN.
  • Don’t give out personal financial information, such as Social Security numbers or passwords to anyone who solicits a contribution from you. Scam artists may use this information to steal your identity and money. People use credit card numbers to make legitimate donations but please be very careful when you are speaking with someone who has called you and you have not yet confirmed they are calling from a legitimate charity.
  • Don’t give or send cash. For security and tax record purposes, contribute by check or credit card or another way that provides documentation of the gift.

Impersonation of Charitable Organizations Another long-standing type of abuse or fraud involves scams that occur in the wake of significant natural disasters.

Following major disasters, it’s common for scam artists to impersonate charities to get money or private information from well-intentioned taxpayers. Scam artists can use a variety of tactics. Some scammers operating bogus charities may contact people by telephone or email to solicit money or financial information. They may even directly contact disaster victims and claim to be working for or on behalf of the IRS to help the victims file casualty loss claims and get tax refunds.

They may attempt to get personal financial information or Social Security numbers that can be used to steal the victims’ identities or financial resources. Bogus websites may solicit funds for disaster victims.

To help disaster victims, the IRS encourages taxpayers to donate to recognized charities. If you are a disaster victim call the IRS toll-free disaster assistance telephone number (1-866-562-5227) if you have questions about tax relief or disaster related tax issues.

And don’t forget to find legitimate and qualified charities with Select Check search tool on IRS.gov. (EINs are frequently called federal tax identification numbers, which is the same as an EIN when using Select Check.)