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Posted on in IRS Scams

Each year, IRS puts out a series of press releases warning taxpayers of twelve schemes they call the "Dirty Dozen." The items on the list can change from year to year, and several typically have to do with taxpayers attempts to game the system by understating income, overstating deductions, engaging in "tax shelter" transactions, and so forth.

But for the past several years, the top three items on the list have been identity theft, phone scams, and phishing schemes - situations in which ordinary people are vulnerable simply because they are trying to comply with the tax laws.

Each year IRS identifies literally millions of returns in which a thief has used someone else's Social Security number to claim refunds. While the agency says it is making progress in detecting and preventing identity theft, "criminals continue to look for increasingly sophisticated ways to breach the tax system," including phishing and phone scams.

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Tagged in: IRS Tax Scam

Privacy and the sharing of personal information have many concerned when being contacted by a caller stating that they represent the IRS. Per John Dalrymple, Deputy Commissioner for Services and Enforcement: "We are evaluating our contacts with taxpayers, outside of the examination context, to determine whether they present risks with respect to phone scams and other such threats."

The new changes will mitigate any risk taxpayers may take when providing personal information over the phone. Deputy Commissioner Dalrymple, stated the policy change clearly in his memo, dated May 20, 2016, "Effective immediately, all initial contacts with taxpayers to commence and examination must be made by mail, instead of the telephone, using the appropriate initial contact letters."

Implementing written correspondence as the initial contact in case examination will establish the validity of the communication received by the taxpayer. The Deputy Commissioner elaborates on the new policy change throughout the memo, indicating the following:"Employees will use the appropriate initial contact letters listed in the Internal Revenue Manual ( IRM ) to notify a taxpayer when a return is selected for examination, and will not make initial contact by telephone."

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The IRS has implemented a new policy relating to the means its agents must use to initiate contact with taxpayers. Effective immediately, when an IRS agent contacts you for the first time, that contact must be via a mailed notice.

Although a follow-up contact may be made by telephone (but not any sooner than 14 days after the initial letter is sent), it is required that any taxpayer selected for an examination (also known as an audit) be notified of this fact via mailed letter.

This action has been taken by the IRS, at least in part, due to the proliferation of telephone scams wherein scammers pretending to be IRS agents contact unsuspecting taxpayers and attempt to obtain personal information, financial information, and even payments.

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Prepaid debit cards already have enough controversy surrounding them, and this latest bit of news about tax refunds being frozen for prepaid debit card users isn't going to do any favors for the industry.

Several news outlets, including ABC News, are reporting that the reason for this "funds freeze" is because the IRS is teaming up with the financial industry to crack down on tax fraud.

The problem is, of course, is that this is affecting the nation's poorest Americans...and they are finding that they have very little recourse.

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The federal administration has been taking a number of initiatives in order to reduce the corporate practice of tax inversion. However, statistics indicate that these initiatives are not having the required effect.

Tax inversion refers to the practice of a company moving its legal base offshore while retaining most operations in the US. According to the Wall Street Journal, companies are continuing to move base to lower-tax destinations overseas, and are taking over US companies after doing so. They are taking advantage of lower tax rates in these tax havens. Typically, in these lower-tax havens like Ireland, corporate tax rates are in the mid-teens. That is in sharp contrast to the United States corporate tax rate, which hovers at 35%.

Not only are these companies saving on the taxes that they have to pay because they have now shifted legal base overseas, but they also enjoy profits from the mergers that they're able to bring about from their overseas bases. A number of companies have overseas bases that are used to save on taxes.

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