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FTB’s top twelve tax scams

Here is another useful list to help get you through the filing season. As we approach April 15, we see increasing numbers of swindles and schemes for avoiding tax, or claiming unearned refunds. Unfortunately, these scams are often promoted and carried out by unscrupulous tax preparers. During filing season, and all year long, FTB vigorously seeks out and exposes fraud. This not only supports equity and the revenue base, it also serves to safeguard the reputations of scrupulous and ethical tax practitioners, who make up the majority of the tax professional community.

We use a comprehensive approach for finding and stopping illegal scams. For example, we work with the California Tax Education Council (CTEC) to inform tax preparers that they must be registered in California if they are not CPAs, enrolled agents, or attorneys. To become registered, they must complete the requirements, or face a minimum $2,500 penalty (increased to $5,000 if they don’t comply within 90 days). On another front, our Fraud Prevention and Detection, and Investigations units are vigilant in finding wrongdoers. Our automated return processing system detects multiple returns filed under the same Social Security Number, refund “mills,” etc.

We now also have a publication that can alert the public to the shady schemes they should be aware of, and avoid. You can download the publication, Franchise Tax Board Top Twelve Tax Scams (FTB 987), from our Website at ftb.ca.gov. It can provide a quick reference for your clients on what they should avoid, and why. The FTB list of top 12 tax scams is similar to the IRS “Dirty Dozen,“ but not identical. Here is our list:

  1. Tax shelters.
  2. Credits and incentives.
  3. Phony home-based business.
  4. Internet businesses.
  5. Offshore accounts.
  6. Moving a business out of state.
  7. Phishing.
  8. Disguised corporate ownership.
  9. Return preparer fraud.
  10. Trust misuse.
  11. Abusive Roth IRAs.
  12. Abuse of charitable organizations and deductions.