When it comes to saving for retirement, you know one thing to be true: more is always better. While this may be the case, some people don’t have enough time or earn enough money to reach their goals.
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With anything regarding your finances, it’s always prudent to be on guard against crooks who want to trick you out of your hard-earned money - and that includes during tax time.
The Internal Revenue Service sent out a warning this tax season about a particular tax scam that often targets seniors, those who have little or no income, and members of church congregations.
Promoters of the scheme promise tax refunds to people who normally aren’t required to file a tax return because they have little or no income, claiming that they can get a tax refund or a nonexistent stimulus payment based on the American Opportunity Tax Credit.
This popular tax credit is reserved for taxpayers who are enrolled in college or paying for their eligible student’s college tuition, and was first available beginning in tax year 2009. Typically, the scam artists falsely tell taxpayers they can claim the credit even if they went to college long before the credit was ever enacted - even decades ago.
Another spin on this scam may involve falsely telling people they can claim the college credit for paying taxes on groceries.
The IRS has already stopped thousands of these fraudulent claims for tax refunds. The agency is also actively investigating the sources of the scheme and says that whoever is promoting these scams may face criminal prosecution.
“This is a disgraceful effort by scam artists to take advantage of people by giving them false hopes of a nonexistent refund,” said IRS Commissioner Doug Shulman. “We want to warn innocent taxpayers about this new scheme before more people get trapped.”
These scams often cost the victims large sums of money in upfront fees - sometimes up to half of the taxpayer’s expected “refund” - and then the con artist is long gone by the time the scam is exposed.
All taxpayers are legally responsible for making sure that their own tax returns are accurate, even if they use a paid tax preparer. Taxpayers will have to pay back refunds that are found to have been issued based on false claims, and the IRS warns people to very cautious.
To avoid falling prey to a tax preparation scheme, beware of “tax preparers” who advertise or say that: you can get a refund with no documentation, you can claim a tax credit you are not entitled to, or you can claim the expired Economic Recovery Credit Program or economic stimulus payments.
The IRS also warns of other red flags: unfamiliar tax preparation firms soliciting from cities outside of the normal business or commuting area, unfamiliar for-profit tax services selling refund and credit schemes to the membership of local churches, internet solicitations that direct you to a toll-free number and then asks for your social security number, and unsolicited offers to prepare your tax return and split the refund.
Internal Revenue Service