Each year, the Oscar nominations single out the top five actors and actresses in leading and supporting roles. Late-night talk show host David Letterman had his often-irreverent top 10 lists. The Nick Hornby novel, “High Fidelity,” and the film of the same name included celebrated top 5 lists of song-related moments.
Not to be left out, the Internal Revenue Service has its annual list of top 12 tax scams, which it refers to as the "Dirty Dozen."
Topping the 2016 list for the first time was identity theft. The IRS says tax-related identity theft, which was third on the list in 2015, occurs when a stolen Social Security number is used to file a tax return claiming a fraudulent refund. “For several years, the IRS has fought aggressively against refund fraud, which includes identity theft,” an IRS fact sheet (FS-2016-1) said.
The 2015 filing season included falsely claiming zero wages using either a Form 4852, a substitute for Form W-2, or a false Form 1099, claiming false income, expenses or exemptions; and frivolous tax arguments.
As part of an ongoing effort to thwart tax fraud, employers next year are to file Copy A of the 2016 Form W-2 with the Social Security Administration by Jan. 31, 2017, regardless of whether the form is filed on paper or electronically.
A pilot program, which debuted in fall 2015, added a verification code to some employees’ copies of Forms W-2, Wage and Tax Statement, for tax year 2015 in a bid to fight fraud and identity theft. A limited number of payroll service providers were participating in the program. If the program is successful, W-2s could possibly change to include a verification code field no earlier than for tax year 2017.
But identity theft is not the IRS’s only worry. The rest of its top 12 scams to watch for in 2016 is varied: telephone scams, phishing, return-preparer fraud, offshore tax avoidance, inflated refund claims, fake charities, falsely padding deductions on returns, excessive claims for business credits, falsifying income to claim credits, abusive tax shelters and frivolous tax arguments.
Tax scams can take many forms beyond those listed by the IRS. The best defense is to remain alert, the agency said. Additional information about tax fraud is available on IRS social media sites, including YouTube and Tumblr, where employers and individual taxpayers can search “scam.”
Take a free trial to Bloomberg BNA’s Payroll Decision Support Network , your one-stop resource for reliable, up-to-date guidance and analysis in every area of payroll administration and compliance.
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