Tax refund scam targets seniors, poor

March 7, 2012 12:00 am

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The Internal Revenue Service is warning people about a new tax scam that tricks low-income and elderly people into filing for fraudulent refunds.

Under the scheme, people are told they are entitled to a tax refund based on the American Opportunity Tax Credit, which is worth up to $2,500 for reimbursement of college expenses.

The scammers claim they can obtain refunds for the victims even if those individuals were not enrolled in or paying for college. Some victims are duped into believing that the credit is available to compensate them for paying taxes on groceries, the IRS said.

"This is a disgraceful effort by scam artists to take advantage of people by giving them false hopes of a nonexistent refund," IRS Commissioner Doug Shulman said. "We want to warn innocent taxpayers about this new scheme before more people get trapped."

Besides seniors and low-income households, other frequent targets include church congregations, the IRS said.

Victims may be charged exorbitant upfront fees to file the claims. By the time they discover they've been cheated, the thieves are long gone.

The agency said it has identified and stopped thousands of these fraudulent claims in recent weeks.

"The IRS is actively investigating the sources of the scheme, and its promoters may be subject to criminal prosecution," the agency said.

Besides being fooled into paying bogus filing fees, taxpayers are on the hook for repaying any fraudulent refunds they receive since they are legally responsible for the accuracy of their returns.

Taxpayers should choose tax preparers carefully, the IRS said.

Typical warning signs of a tax fraud include:

• Refunds based on false statements about tax credits.

• Unfamiliar for-profit tax services promising refunds to local church members.

• Internet ads that direct people to toll-free numbers and then ask for Social Security numbers.

• Homemade flyers and brochures advertising refunds without proof of eligibility.

• Promises of refunds with no documentation required.

• Unsolicited offers to prepare a return and split the refund.

• Claims for the expired Economic Recovery Credit Program or for economic stimulus payments.

For a rundown of the most common types of tax scams, see the IRS' Dirty Dozen list for 2012 at,,id=254383,00.html.

First Published 2012-03-06 23:19:13

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