• WASHINGTON –– Hiding income in offshore accounts, identity theft, return preparer fraud, and filing false or misleading tax forms top the annual list of “dirty dozen” tax scams in 2011, the Internal Revenue Service announced today.

“Don't be duped by scammers who want to steal your information or who offer some amazing financial deal," said IRS spokesman Dan Boone. "Remember, if something sounds too good to be true, it probably is."

Scheme promoters frequently end up facing heavy fines and imprisonment. Meanwhile, taxpayers who wittingly or unwittingly get involved with these schemes must repay all taxes due plus interest and penalties.

Following are the first five scams to avoid from the IRS Dirty Dozen for 2011:

1. Hiding Income Offshore

If someone tells you there's no need to report an offshore account to the IRS, don't believe them. The IRS aggressively pursues taxpayers involved in abusive offshore transactions as well as the promoters, professionals and others who facilitate or enable these schemes. The IRS announced a special voluntary disclosure initiative, open through Aug. 31, 2011, designed to bring offshore money back into the U.S. tax system and help people with undisclosed income from hidden offshore accounts get current with their taxes.

2. Identity Theft and Phishing

If you get an e-mail that appears to be from the IRS or from your bank or other financial institution, watch out - it may be a scammer phishing for your personal information! Identity theft is a major problem that affects many people each year. That's why it's important that taxpayers protect their personal information. Anyone who believes his or her personal information has been stolen and used for tax purposes should immediately contact the IRS Identity Protection Specialized Unit at 1-800-908-4490. More information on identity theft and taxes is available on the IRS website. A suspicious e-mail or an “IRS” Web address that does not begin with http://www.irs.gov should be forwarded to the IRS at This e-mail address is being protected from spambots. You need JavaScript enabled to view it .

3. Return Preparer Fraud

If a tax preparer brags about getting you a bigger refund than the preparer down the street, walk away. That may indicate you've chosen someone who is about to prepare a fraudulent tax return. While most return preparers are professionals who provide honest and excellent service to their clients, some make basic errors or engage in fraud and other illegal activities. Dishonest return preparers can cause big trouble for taxpayers who fall victim to their ploys. To increase confidence in the tax system and improve compliance with the tax law, the IRS is implementing a number of requirements for paid tax preparers, including registration with the IRS and a preparer tax identification number (PTIN), as well as competency tests and ongoing continuing professional education.

4. Filing False or Misleading Forms

Maybe you've heard of this - one version of this scheme is based on the bogus theory that the federal government maintains secret accounts for its citizens and that taxpayers can gain access to funds in those accounts by issuing 1099-OID forms to their creditors, including the IRS. Not true! Because scammers often use information from family or friends in filing false or fraudulent returns, beware of requests for such data.  Don’t fall prey to people who encourage you to claim deductions or credits you are not entitled to or willingly allow others to use your information to file false returns. If you are a party to such schemes, you could be liable for financial penalties or even face criminal prosecution.

5. Frivolous Arguments

It can start with a coworker or friend telling you that no one is really required to file taxes. Promoters of frivolous schemes encourage people to make unreasonable and outlandish claims to avoid paying the taxes they owe. The IRS has a list of frivolous legal positions that taxpayers should avoid. These arguments are false and have been thrown out of court. While taxpayers have the right to contest their tax liabilities in court, no one has the right to disobey the law or IRS guidance.

How to Report Suspected Tax Fraud Activity

Suspected tax fraud can be reported to the IRS using Form 3949-A, Information Referral. 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 identity of the person filing the report can be kept confidential.

Whistleblowers also may provide allegations of fraud to the IRS and may be eligible for a reward by filing Form 211, Application for Award for Original Information, and following the procedures outlined in Notice 2008-4, Claims Submitted to the IRS Whistleblower Office under Section 7623.

The Internal Revenue Service today reminded taxpayers that the April 18 tax filing deadline is less than a month away and announced that nearly 100 IRS offices will be open nationwide Saturday, March 26.

In Tennessee, the IRS Taxpayer Assistance Centers in Chattanooga, Memphis and Nashville will be open Saturday, March 26, from 9 a.m. to 2 p.m.  These IRS centers offer help to anyone who has federal tax account issues or questions and offer free tax preparation and e-filing to most people whose 2010 household income was $49,000 or less.

Free tax preparation and e-filing are also offered at about 180 volunteer-staffed help sites in 56 Tennessee counties. These sites are for filers whose household income was $49,000 or less last year or who are age 60 or older. Filers can call the IRS toll-free at 1-800-906-9887 to find the closest free help site.

“Last-minute tax filers make the most errors," said IRS spokesman Dan Boone.  "IRS encourages people to reduce the chance of errors by filing now and by using tax software or finding a qualified, reputable tax preparer who does."

IRS Free File at www.IRS.gov offers free online use of brand-name tax software to filers whose 2010 income was $58,000 or less. Free File includes a Fillable Forms option that is free for all filers, regardless of income.

Generally, returns prepared manually on paper have an error rate of almost 20 percent, while returns prepared using tax software have an error rate of less than one percent.

More than half a million tax returns have been filed with the IRS from home computers so far this year in Tennessee, an increase of 9 percent compared to the number of returns from the same time last year.

Nationwide, the number of returns filed from home computers is up almost 6 percent over last year at this time.
IRS reminds taxpayers that everyone can use Free File to prepare and e-file their tax returns for free, either by using brand name software or Free File Fillable Forms, which is the electronic version of IRS paper forms.

Individuals or families with 2010 adjusted gross incomes of $58,000 or less can use Free File software. Using Free File Fillable Forms has no income restrictions.

The total number of individual income tax returns that have been e-filed this year by Tennesseans is 1.25 million, an increase of 5 percent from the same time last year. E-file includes both returns filed from home computers and returns e-filed by professional tax return preparers. Nationwide, the total number of returns e-filed has risen by 2 percent compared to last year at this time.

NASHVILLE — Refunds totaling more than $1.1 billion may be waiting for nearly 1.1 million people nationwide who did not file a federal income tax return for 2007, the Internal Revenue Service announced today.

In Tennessee alone, $17, 049,000 in refunds may be waiting for 17,200 people.
To collect the money, a return for 2007 must be filed with the IRS no later than Monday, April 18, 2011. The IRS estimates that half of these potential 2007 refunds are $640 or more. In Tennessee, half of the refunds are $633 or more.

Some people may not have filed because they had too little income to require filing a tax return even though they had taxes withheld from their wages or made quarterly estimated payments. In cases where a return was not filed, the law provides most taxpayers with a three-year window of opportunity for claiming a refund. If no return is filed to claim a refund within three years, the money becomes property of the U.S. Treasury.

For 2007 returns, the window closes on April 18, 2011. The law requires that the return be properly addressed, mailed and postmarked by that date. There is no penalty for filing a late return qualifying for a refund.

The IRS reminds taxpayers seeking a 2007 refund that their checks will be held if they have not filed tax returns for 2008 and 2009. In addition, the refund will be applied to any amounts still owed to the IRS, and may be used to offset unpaid child support or past due federal debts such as student loans.

By failing to file a return, people stand to lose more than a refund of taxes withheld or paid during 2007. In addition, many low-and-moderate income workers may not have claimed the Earned Income Tax Credit (EITC). The EITC helps individuals and families whose incomes are below certain thresholds, which in 2007 were $39,783 for those with two or more children, $35,241 for people with one child, and $14,590 for those with no children. For more information, visit the EITC Home Page.

Current and prior year tax forms and instructions are available on the Forms and Publications page of IRS.gov or by calling toll-free 1-800-TAX-FORM (1-800-829-3676). Taxpayers who are missing Forms W-2, 1098, 1099 or 5498 for 2007, 2008 or 2009 should request copies from their employer, bank or other payer. If these efforts are unsuccessful, taxpayers can get a free transcript showing information from these year-end documents by calling 1-800-908-9946, or by filing Form 4506-T, Request for Transcript of Tax Return, with the IRS.

WASHINGTON —  Over 12,000 free tax preparation sites will be open nationwide this year as the Internal Revenue Service continues to expand its partnerships with nonprofit and community organizations providing vital tax preparation services for low- to moderate-income and elderly taxpayers.

The IRS Volunteer Income Tax Assistance (VITA) Program offers free tax help to people who earn less than $49,000. The Tax Counseling for the Elderly (TCE) Program offers free tax help to taxpayers who are 60 and older.

Today, partners and local officials will be hosting news conferences or issuing news releases nationwide to highlight the Earned Income Tax Credit (EITC) and their free tax preparation programs. The EITC is one of the federal government’s largest benefit programs for working families and individuals. But taxpayers must file a tax return, even if they do not have a filing requirement, and specifically claim the credit to get the benefit.

Taxpayers need to present the following items to have their returns prepared:

• Photo identification
• Valid Social Security cards for the taxpayer, spouse and dependents
• Birth dates for primary, secondary and dependents on the tax return
• Wage and earning statement(s) Form W-2, W-2G, 1099-R, from all employers
• Interest and dividend statements from banks (Forms 1099)
• A copy of last year’s federal and state returns, if available
• Bank routing numbers and account numbers for direct deposit
• Other relevant information about income and expenses
• Total paid for day care
• Day care provider's identifying number

To file taxes electronically on a Married Filing Jointly tax return, both spouses must be present to sign the required forms.

Trained community volunteers can help eligible taxpayers with all special credits, such as the EITC, Child Tax Credit or Credit for the Elderly. Also, many sites have language specialists to assist people with limited English skills.  To locate the nearest VITA site, taxpayers should check the VITA site list available online at www.IRS.gov or call 1-800-906-9887.

As part of the IRS-sponsored TCE Program, AARP offers the Tax-Aide counseling program at more than 7,000 sites nationwide during the filing season. Trained and certified AARP Tax-Aide volunteer counselors help people of low-to-middle income with special attention to people age 60 and older. To locate the nearest AARP Tax-Aide site, call 1-888-227-7669 or visit AARP’s Internet site.

The military also partners with the IRS to provide free tax assistance to military personnel and their families. The Armed Forces Tax Council (AFTC) consists of the tax program coordinators for the Army, Air Force, Navy, Marine Corps and Coast Guard. The AFTC oversees the operation of the military tax programs worldwide, and serves as the main conduit for outreach by the IRS to military personnel and their families. Volunteers are trained and equipped to address military specific tax issues, such as combat zone tax benefits and the effect of the EITC guidelines.

In addition to free tax return preparation assistance, most sites use free electronic filing. An e-filed tax return means a fast refund. Taxpayers who combine e-file and direct deposit can generally get their refunds in as few as 10 days.

Taxpayers who file electronically also can opt to file now and pay later. If taxpayers owe, they can make a payment April 18, 2011, by authorizing an electronic funds withdrawal (direct debit) from a checking or savings account, paying by credit, by check or money order (made out to the United States Treasury) using Form 1040-V, Payment Voucher.

For taxpayers who want to prepare and e-file their own tax returns, there is IRS Free File.  Everyone can use Free File, the free way to prepare and e-file federal taxes either through brand-name software or online fillable forms. Individuals or families with 2010 adjusted gross incomes of $58,000 or less can use Free File software. Free File Fillable Forms, the electronic version of IRS paper forms, has no income restrictions.  For either service, taxpayers must go through www.irs.gov/freefile to access the programs.

Taxpayers also can seek free assistance at the 400 IRS Taxpayer Assistance Centers nationwide. On Saturday, Jan. 29, and Saturday, Feb. 5, the IRS will open selected offices to provide special assistance to EITC eligible taxpayers. In addition, a number of community partners will also open their doors. Locations nationwide are listed on www.IRS.gov.

• • • Free File on IRS.gov This free tax software and free electronic filing program will walk taxpayers through a question and answer format and help them claim the tax credits and deductions for which they are eligible.
    • Free tax preparation sites EITC-eligible taxpayers can seek free tax preparation nationwide at more than 12,000 volunteer individual tax assistance sites. To locate a site, taxpayers may check a nationwide free tax preparation site list available at http://www.IRS.gov. They can also call the community’s 211 or 311 number for local services or call the IRS at 800-906-9887.
    • IRS Taxpayer Assistance Centers EITC-eligible taxpayers can seek free assistance in 400 IRS locations across the country. Locations are online at www.IRS.gov.

WASHINGTON — The Internal Revenue Service and partners nationwide marked the 5^th Earned Income Tax Credit Awareness Day on Friday, Jan. 28. This initiative highlights the availability of one of the federal government’s largest benefit programs for working families and individuals.

The American Recovery and Reinvestment Act of 2009 created a new category of families with three or more children and increased the maximum benefit of EITC for tax years 2009 and 2010. The Tax Relief and Job Creation Act of 2010 extended these changes through 2012.

The maximum credit for 2010 tax returns is $5,666 for workers with three or more qualifying children. However, workers without qualifying children may also be eligible for a smaller credit amount.

“Nearly 665,000 Tennessee taxpayers claimed over $1.5 billion in EITC last year," said IRS spokesman Dan Boone. “But we need to reach the remaining eligible workers and get them to claim it and receive it."

Workers who earned $48,362 or less from wages, self-employment or farm income last year could receive larger refunds if they qualify for the EITC. Four out of five eligible taxpayers claimed the EITC last year obtaining an extra $2,200 from the credit on average. This represents a critical financial boost to over 26 million workers who earn low to moderate incomes.

Eligibility for the EITC is determined based on a number of factors including earnings, filing status and eligible children.  Many people who experienced a change in these factors will qualify for the first time this year and may not be aware of the credit.

Taxpayers must file a tax return, even if they do not have a filing requirement, and specifically claim the credit. Those who typically fail to claim the EITC include rural workers and their families; non-traditional families, such as grandparents or foster parents raising children; taxpayers without qualifying children; individuals with limited English proficiency; Native Americans; and taxpayers with disabilities.

You earned it. Now file, claim it and get it
It is easy to verify eligibility for EITC by going to www.IRS.gov and typing “EITC” into the search box.  There is an online EITC Assistant, which can help taxpayers determine eligibility by answering a few simple questions.

There are several ways to file a tax return to claim the EITC for free:

On Saturday, Jan. 29, and Saturday, Feb. 5, the IRS will open selected offices to provide special assistance to EITC eligible taxpayers. In addition, a number of community partners will also open their doors. Locations nationwide are listed on www.IRS.gov.

More information and the details of eligibility rules are available at www.irs.gov/eitc.

Three Extra Days to File and Pay
Taxpayers, nationwide, will have until Monday, April 18, 2011, to file their 2010 returns and pay any taxes due. Taxpayers get the extra time because Emancipation Day, a holiday in the District of Columbia, is observed this year on Friday, April 15. By law, D.C. holidays impact tax deadlines in the same way that federal holidays do. The April 18 deadline applies to any return or payment normally due on April 15. It also applies to the deadline for requesting a tax-filing extension and for making 2010 IRA contributions.

Special Charitable Contributions for Certain IRA Owners
This provision, now available through the end of 2011, offers older owners of individual retirement accounts (IRAs) a different way to give to charity. An IRA owner age 70½ or over can directly transfer, tax-free, up to $100,000 per year to eligible charities. Known as a qualified charitable distribution (QCD), this option is available for distributions from IRAs, regardless of whether the owners itemize their deductions. Distributions from employer-sponsored retirement plans, including SIMPLE IRAs and simplified employee pension (SEP) plans, are not eligible to be treated as a qualified charitable distribution.

NOTE: For tax-year 2010 only, IRA owners can choose to treat QCDs made during January 2011 as if they occurred in 2010.
To qualify, the funds must be contributed directly by the IRA trustee to an eligible charity. Amounts so transferred are not taxable and no deduction is available for the transfer.

Not all charities are eligible. For example, donor-advised funds and supporting organizations are not eligible recipients. Remember to check eligibility of the charity before requesting a QCD.

All QCDs from an IRA to eligible charities are counted in determining whether the owner has met the IRA’s required minimum distribution. Where individuals have made nondeductible contributions to their traditional IRAs, a special rule treats QCD amounts as coming first from taxable funds, instead of proportionately from taxable and nontaxable funds, as would be the case with regular distributions.

Report qualified charitable distributions on Form 1040 Line 15. See the instructions for Form 1040 Line 15 for details.

More People Qualify for Roth IRA Conversions
Income limits no longer apply to rollovers or conversions to Roth IRAs from other retirement plans. In the past, only taxpayers with modified adjusted gross income of $100,000 or less were eligible, and a married person filing a separate return who lived with his or her spouse at any time during the year was barred from Roth IRA rollovers or conversions, regardless of income.

For 2010 rollovers and conversions only, half of the resulting income must be included in income in tax year 2011 and the other half in 2012, unless the taxpayer chooses to include all of it in income in 2010. In all situations, taxpayers must report any 2010 conversion on Form 8606 for tax year 2010. These rules do not apply to rollovers from another Roth IRA or from a designated Roth account. See Form 8606 and its instructions for details.

Exemptions and Itemized Deductions No Longer Phased Out
Overall income limits for personal and dependency exemptions and itemized deductions do not apply. Before 2010, taxpayers whose incomes were above certain levels lost part or all of their exemptions and part of their itemized deductions. For taxpayers at all income levels, limitations continue to apply to particular itemized deductions, such as medical and dental expenses, certain miscellaneous itemized deductions and casualty and theft losses.

Adoption Credit Expanded
The maximum adoption credit for 2010 is increased to $13,170 per child, up from $12,150 in 2009. The credit is refundable, meaning that eligible taxpayers can get the credit even if they owe no tax. In general, the credit is based on the qualified adoption expenses, which include adoption fees, court costs, attorney’s fees and travel expenses. Income limits and other special rules apply.

In addition to filling out Form 8839, Qualified Adoption Expenses, eligible taxpayers must include with their return an adoption order or decree or certain other documents.

Because of these documentation requirements, taxpayers claiming the adoption credit will have to file paper tax returns. Normally, it takes six to eight weeks to get a refund claimed on a complete and accurate paper return where all required documents are attached. Taxpayers claiming the credit will still be able to use IRS Free File to prepare their returns, but the returns must be printed out and sent to the IRS, along with all required documentation.

Health Insurance Deduction Reduces Self Employment Tax
In 2010, eligible self-employed individuals can use the self-employed health insurance deduction to reduce their social security self-employment tax liability in addition to their income tax liability. As in the past, eligible taxpayers claim this deduction on Form 1040 Line 29. But in 2010, eligible taxpayers can also enter this amount on Schedule SE Line 3, thus reducing net earnings from self-employment subject to the 15.3 percent social security self-employment tax.

Premiums paid for health insurance covering the taxpayer, spouse and dependents generally qualify for this deduction. Premiums paid for coverage of an adult child, under age 27 at the end of the year, for the time period beginning on or after March 30, 2010, also qualify for this deduction, even if the child is not the taxpayer’s dependent.

As before, the insurance plan must be set up under the taxpayer’s business, and the taxpayer cannot be eligible to participate in an employer-sponsored health plan. Details, including a worksheet, are in the instructions to Form 1040.

First-time homebuyer credit
Taxpayers who claimed the first-time homebuyer credit for a home bought in 2008 must generally begin repaying it on the 2010 return. In most cases, the credit must be repaid over a 15-year period. Many of those affected by this requirement received reminder letters from the IRS.

A repayment requirement also applies to a taxpayer who claimed the credit on either their 2008 or 2009 return and then sold it or stopped using the home as their main home in 2010. Use Form 5405 to report the repayment.

In addition, certain members of the armed forces and some other taxpayers still have time to buy a home and take the credit. See Form 5405 and its instructions for details.

Deduction for Corrosive drywall
Taxpayers may claim a casualty loss deduction, using a special formula, for amounts paid to repair damage to their homes and household appliances resulting from corrosive drywall. The deduction is smaller for taxpayers with a pending claim for reimbursement or those who plan to pursue reimbursement through property insurance, litigation or other means.

Standard Mileage Rates for 2010
The standard mileage rate for business use of a car, van, pick-up or panel truck is 50 cents for each mile driven. The rate for the cost of operating a vehicle for medical reasons or as part of a deductible move is 16.5 cents per mile. The rate for using a car to provide services to charitable organizations is set by law and remains at 14 cents a mile.

AMT Exemption Increased
For tax-year 2010, the alternative minimum tax exemption increases to the following levels:

• • $72,450 for a married couple filing a joint return and qualifying widows and widowers, up from $70,950 in 2009.
  • $36,225 for a married person filing separately, up from $35,475.
  • $47,450 for singles and heads of household, up from $46,700.

Tax Breaks Extended
Several tax breaks that expired at the end of 2009 were renewed and can be claimed on 2010 returns. They include:

• State and local general sales tax deduction, primarily benefiting people living in areas without state and local income taxes. Claim on Schedule A , Line 5.
• Higher education tuition and fees deduction benefiting parents and students. Claim on Form 8917 .
• Educator expense deduction for kindergarten through grade 12 educators with out-of-pocket classroom expenses of up to $250, Claim on Form 1040, Line 23 or Form 1040A Line 16.
• District of Columbia first-time homebuyer credit. Claim on Form 8859.