Taxpayers, Beware: Keep an Eye on 'Dirty Dozen'

And this year's tax scam winners are...

1. Telephone Excise Tax Refund Abuses: Taxpayers request a refund of the entire amount of their phone bills, rather than just the three-percent tax on long-distance and bundled service to which they are entitled.

2. Abusive Roth IRAs: Taxpayers should be wary of advisers who encourage them to shift undervalued property to Roth IRAs. In one scam variation, a promoter has the taxpayer move undervalued common stock into a Roth IRA, circumventing the annual maximum contribution limit and allowing otherwise taxable income to go untaxed.

3. Phishing: Internet-based criminals pose as representatives of a financial institution and send out fictitious e-mail correspondence in an attempt to trick consumers into disclosing private information.

4. Disguised Corporate Ownership: Domestic shell corporations and other entities are being formed and operated in certain states for the purpose of disguising the ownership of the business or financial activity. Once formed, these anonymous entities can be, and are being, used to facilitate underreporting of income.

5. Zero Wages: In this scam, a "corrected" Form 1099 showing zero or little income is submitted with a federal tax return.

6. Return Preparer Fraud: Dishonest return preparers can cause many headaches for taxpayers who fall victim to their schemes. As the old saying goes, "If it sounds too good to be true, it probably is."

7. American Indian Employment Credit: Taxpayers submit returns and claims reducing taxable income by substantial amounts citing an American Indian employment or treaty credit. Although there is an Indian Employment Credit available for businesses that employ Native Americans or their spouses, there is no provision for its use by employees.

8. Trust Misuse: There are currently more than 150 active abusive trust investigations underway and 49 injunctions have been obtained against promoters since 2001.