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Tax Fraud
Sharing Tax-Credit Dependents
The earned income credit offers lower-income workers a way to save on taxes. The tax
break is bigger for taxpayers who are supporting children. To get the maximum credit, a
filer need only claim two children as dependents. Unscrupulous tax preparers sometimes
"borrow" one client's "extra" kids and transfer them to another filer's return to
illegally manufacture this tax break.
For example, Joe has four youngsters. His preparer
properly lists two of Joe's children to claim the full earned income tax credit.
However, Joe's other two kids are listed on another individuals (probably a relative
who is childless) return to illegally get the same tax saving.
Often, reports the IRS, the preparer convinces clients to participate in the bogus claim
by offering to split the tax refund money generated by the illegal claim. The tax pro could
face criminal charges, and civil penalties could be assessed the taxpayers.
If you encounter any of these schemes, or are approached with a new one, the agency wants to
know. Report suspected tax fraud by calling the IRS toll-free at 1-800-829-0433.
How to Report Suspected Tax Fraud Activity
Suspected tax fraud can be reported to the IRS using IRS Form 3949-A, Information Referral.
Form 3949-A is available for download from the IRS Web site at IRS.gov, or through the U.S.
Mail by calling 1-800-829-3676. The completed form or a letter detailing the alleged fraudulent
activity should be addressed to the Internal Revenue Service, Fresno, CA 93888. The mailing
should include specific information about who is being reported, the activity being reported,
how the activity became known, when the alleged violation took place, the amount of money
involved and any other information that might be helpful in an investigation. The person
filing the report is not required to self-identify, although it is helpful to do so. The
identity of the person filing the report can be kept confidential. The person may also be
entitled to a reward.
Related Tax Fraud Links:
IRS Free Online Filing
The "Dirty Dozen" Tax Scams
Tax Scams - How to Recognize and Avoid Them
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