FEBruary 26, 2001
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Tax Tid-Bits
Watch Out For Tax Scams!

The IRS has issued a nationwide alert to taxpayers warning them not to fall victim to tax scams. These schemes take several shapes, ranging from promises of special tax refunds to illegal ways of "untaxing" yourself.

The IRS urges people to avoid these common schemes:

  • No taxes being withheld from your wages.  These schemes instruct employers not to withhold federal income tax or employment taxes from wages paid to employees.
  • "I don't pay taxes – why should you?"  Some con artists claim they don't file or pay taxes and that they can tell you how for a fee.
  • African-Americans get a special tax refund.   Thousands of African-Americans have been misled by this scam offering to file for tax credits or refunds related to supposed reparations for slavery.
  • Pay the tax, then get the prize.  If a caller says you've won a prize but need to pay the taxes up-front, don't believe it. 
  • "Untax yourself for $49.95."   Some ads say that paying taxes is "voluntary," but U.S. courts have continuously rejected this and similar arguments that are nearly as old as snake oil.
  • Social Security tax schemes.   Don't accept offers to recover refunds of Social Security taxes withheld. The fraudsters generally charge an up-front fee of about $100 plus a percentage of any refund received, but they just pocket the $100.
  • "I can get you a big refund for a fee."  Refund scheme operators sometimes ask to "borrow" a taxpayer's Social Security number or offer to create phony W-2s, promising to split the resulting tax refund. The IRS catches most of these false claims.
  • An IRS "agent" comes to your house to collect.   IRS special agents, field auditors, and collection officers carry picture IDs and will normally try to contact you before they visit.
Source: IR-2001-19 2-18-2001