Scam Watch: IRS warns of Tax-Refund Schemes

Here is a roundup of alleged cons, frauds and schemes to watch out for this tax season.

Tax Refunds
As the tax-filing deadline approaches, the Internal Revenue Service said consumers should watch out for scam artists who offer to help them obtain tax refunds through the filing of bogus returns.

In one common scheme, companies offer to help victims obtain a tax refund by seeking an American Opportunity Tax Credit by claiming deductions for college tuition payments, even if the victim did not attend college during the tax period, the IRS said.

In recent weeks, the IRS has stopped thousands of bogus refund claims using that fraudulent deduction. Even if someone else files the return, taxpayers can be held liable for submitting false deductions, including penalties and interest, the IRS said.

Loan Modifications
Consumer groups are warning homeowners who have fallen behind on their mortgages to be careful when dealing with companies or individuals offering to modify home loans.

Homeowners should be mindful of companies that ask for fees before providing services, guarantee they can stop a foreclosure or tell you to stop making mortgage payments and pay them instead, NeighborWorks America and the Lawyers’ Committee for Civil Rights Under Law said in a news release.

“Scams present a real threat to homeowners who are afraid of losing their homes, especially now that new bank settlements and government programs are in the headlines,” says Deborah Boatright, Northeast regional director with NeighborWorks America. “At times like this, we often see a spike in activity among companies who pretend to be authorized by the government but are in fact scams.”