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Avoid Phony Refund Schemes Abusing Popular College Tax Credit - 9 Tips

March 17, 2012

The IRS has provided nine useful tips to help taxpayers avoid an emerging tax scheme. This new scam tempts senior citizens and other taxpayers to file tax returns claiming fraudulent refunds. These schemes promise refunds to people who have little or no income and normally don’t have a tax filing requirement.

Promoters claim that they can obtain a tax refund or nonexistent stimulus payment based on the American Opportunity Tax Credit—even if the victim was not enrolled in or paying for college. A variation of this scheme claims the college credit is available to compensate people for paying taxes on groceries.

These schemes can be quite costly for victims. Promoters may charge exorbitant upfront fees to file claims, and they often disappear once a victim discovers that they have been scammed. The following are seven informative tips to help you identify and avoid such activity. Taxpayers should look for:

  1. Fictitious claims for refunds or rebates based on false statements of entitlement to tax credits.

  2. Unfamiliar for-profit tax services selling refund and credit schemes to the membership of local churches.

  3. Internet solicitations that direct individuals to toll-free numbers and then solicit social security numbers.

  4. Homemade flyers and brochures implying that credits or refunds are available without proof of eligibility.

  5. Offers of free money with no documentation required.

  6. Promises of refunds for “Low Income – No Documents Tax Returns.”

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

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

  9. Unfamiliar return preparation firms soliciting business from cities outside of the normal business or commuting area.

To get the real facts on education-related tax benefits, visit the “Tax Benefits for Education Information Center” on the IRS.gov website.

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