While there have always been villains intent on taking what is not rightfully theirs, advances in technology have made it more frustrating than ever to thwart their evil plans. That fact is evident in this year’s “Top 12 Tax Scams” as listed by the Internal Revenue Service (IRS). These swindles are particularly evident during tax season. Be alert and protect your personal and financial data lest you fall victim to one of these schemes highlighted by the IRS.

1. Identity theft – The No. 1 scam this year is tax-related identity theft, which the IRS defines as when someone uses a stolen Social Security number to file a tax return claiming a fraudulent refund. Although the IRS has partnered with states and the tax-preparation industry to try to improve security for taxpayers, the best defense is to carefully guard your personal data and file your tax return as early as possible.

2. Phone scams – When they are not trying to track down your personal information online, criminals may call, impersonating the IRS and threatening arrest, deportation, or license revocation unless you pay “overdue taxes” immediately. The scammers sometimes use the victim’s name, address, and other personal information, which makes the call sound official. But the IRS says it never calls to demand immediate payment, call about taxes owed without first having mailed a bill, call to demand payment without the opportunity to question or appeal, require use of a specific payment method, such as a prepaid debit card or wire transfer, ask for credit or debit card numbers over the phone, or threaten to bring in local police or other law enforcement.

3. Phishing – Another online scam is “phishing,” in which taxpayers receive emails – purportedly from the IRS – seeking financial or personal information. But the IRS generally will not send you an email without contacting you via regular mail first. A taxpayer who receives a suspicious email should send it to phishing@irs.gov.

4. Preparer fraud – The IRS warns against “dishonest preparers who set up shop each filing season to perpetrate refund fraud, identity theft and other scams that hurt taxpayers.” Often these fake tax preparers promise excessively large tax refunds to lure victims. Before providing personal and financial information to a tax preparer, check the preparer’s credentials, and confirm the preparer will be available after your return is filed. Always have a refund deposited into your own account, and not that of the tax preparer. And avoid tax preparers who base their fees on a percentage of the refund or promise larger refunds than other preparers.

5. Hiding money or income offshore – Hiding money or income offshore has become a major focus of IRS enforcement efforts. Through cross-border cooperation it is becoming more difficult for individuals and corporations to conceal assets overseas. The IRS offers a number of programs, including the Offshore Voluntary Disclosure Program, for taxpayers to come into compliance with reporting requirements.

6. Inflated refund claims – Anything that appears too good to be true probably IS too good to be true. Tax preparers who promise huge tax refunds may be using illegal methods to inflate your claims, such as tax credits to which you are not entitled. Remember, if caught, you are the one responsible for what is on their return, even if someone else prepares your tax return.

7. Fake charities – The IRS cautions taxpayers to check the IRS’s website to determine whether a charity qualifies for deductible contributions. Legitimate charities should give donors an employer identification number, which can then be used to check whether the charities are qualified on the IRS website. Don’t claim a charitable contribution without checking first or it may not be allowed by the IRS.

8. Padding deductions – Deceitfully inflating deductions or expenses on a tax return in order to pay less tax or receive a bigger refund is illegal. This item is new to the dirty dozen list this year. Avoid overstating charitable contributions or inflating business expenses, and don’t claim tax credits you are not entitled to, such as the EITC and the child tax credit. Violators may be subject to substantial penalties or even face criminal prosecution.

9. Excessive claims for business credits – Two business tax credits that the IRS says are routinely used improperly are fraudulent claims for refunds of fuel excise tax and bogus claims for the research tax credit. This year the IRS will be using refund fraud filters to identify and stop fraudulent fuel excise tax refunds.

10. Falsifying income to claim tax credits – This usually involves falsely claiming higher earned income to qualify for the earned income tax credit (EITC), which is a refundable credit. Unscrupulous preparers may make this claim to get taxpayers larger refunds than they are entitled to. Again, if the IRS identifies fraud in EITC claims the taxpayer may be subject to penalties, interest, and possible prosecution.

11. Abusive tax shelters – Abusive tax shelters are often complex schemes that use multiple flow through entities (such as LLCs or LLPs) to evade taxes. Other schemes may involve international business companies, foreign financial accounts, offshore credit or debit cards, and multilayer transactions to conceal who owns the income or assets. Participating in these schemes can result in significant penalties and interest and possible criminal prosecution.

12. Frivolous tax arguments – Some people try to avoid paying taxes by taking “questionable” positions and hoping the IRS won’t notice. Two examples cited by the IRS are claims such that “only employees of the federal government are subject to income tax,” or that only foreign income is taxable. The IRS also reminds taxpayers that they are automatically subject to a $5,000 penalty for frivolous tax positions.

If you think you may have been a victim of one or more of these tax scams, contact the IRS or your tax preparation professional, or call Gray, Gray & Gray’s Tax Department at (781) 407-0300.