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The IRS announced that it is actively investigating a tax scam seen in recent weeks related to the filing of tax returns claiming fraudulent refunds.

The scammers claim they can obtain for the victims a tax refund based on the American Opportunity Tax Credit, even if the victim was not enrolled in college. The scammers claim that refunds are available even if the victim went to school decades ago. There is also a variation of this scheme that claims the college credit is available to compensate people for paying taxes on groceries.

The scam promises refunds to people who have little or no income, and normally don’t have a tax filing requirement. They are targeting senior citizens, people with very low incomes and church members.

This scam ends up being expensive for the victims since the scammers charge exorbitant upfront fees to file these claims and are often long gone when victims discover they’ve been scammed. In addition, the victims must repay the IRS any refunds they received as a result of the fraudulent claim.

To avoid becoming a victim of this tax scam, the IRS says to look out for the following warning signs:

  • Claims of refunds based on false statements of entitlement to tax credits.
  • Unfamiliar for-profit tax services selling refund and credit schemes.
  • Internet solicitations that direct individuals to toll-free numbers and then solicit social security numbers.
  • Homemade flyers and brochures implying credits or refunds are available without proof of eligibility.
  • Offers of free money with no documentation required.
  • Promises of refunds for “Low Income – No Documents Tax Returns.”
  • Claims for the expired Economic Recovery Credit Program or for economic stimulus payments.
  • Unsolicited offers to prepare a return and split the refund.
  • Unfamiliar return preparation firms soliciting business from cities outside of the normal business or commuting area.