NEWS
Legal Eagle: Tax Season on the Farm: Scams Targeting Agricultural Filers
With the April 15 deadline fast approaching, farmers, ranchers, and small rural business owners should be on guard. Tax fraud schemes increasingly target agricultural communities, and the consequences can be devastating, even for those who unknowingly benefit.
How the Scams Work
The most common schemes take two forms. First, criminals posing as IRS or USDA agents call, email, or text rural taxpayers, demanding immediate payment or threatening liens on farm property. The IRS does not cold-call taxpayers to demand payment or threaten arrest, and USDA headquarters staff will not cold-call producers either. Anyone who asks you to pay by gift card or wire transfer is almost certainly a scammer.
Second, and equally dangerous, are unscrupulous tax preparers. They promise inflated refunds through fictitious deductions, fabricated farm expenses, or bogus claims for credits like the fuel tax credit. Red flags include being asked to sign a blank return, fees based on refund size, or having your refund deposited into the preparer's own account. The IRS's annual "Dirty Dozen" list has repeatedly flagged false fuel tax credit claims and crooked preparers as top threats. Agricultural filers, who deal in complex Schedule F deductions and specialized credits, are prime targets.
The Criminal and Civil Penalties
The penalties are steep. Under IRC § 7206, willfully filing or aiding in a fraudulent return is a felony carrying up to three years in prison and fines up to $100,000. A related misdemeanor under IRC § 7207 brings up to one year and $10,000 in fines. Preparers who willfully understate a client's liability face penalties under IRC § 6694(b) of $5,000 or 75 percent of their fee, whichever is greater.
Taxpayers are not off the hook just because someone else prepared their return. You are responsible for every line on your return, no matter who filled it out. Signing a return with inflated deductions or fabricated credits can trigger a civil fraud penalty of 75 percent of the underpayment, plus interest. Even unknowing participants may face accuracy-related penalties of 20 percent for a substantial understatement of tax. Ignorance is not a complete defense.
What Rural Taxpayers Should Do Before April 15
Protecting yourself starts with choosing the right preparer. Verify that yours has a valid Preparer Tax Identification Number, or PTIN, which the IRS requires for anyone who prepares returns for compensation. Look for credentials, enrolled agents, CPAs, and attorneys are held to professional standards that uncredentialed preparers are not. Never sign a blank or incomplete return and review every line before filing. If a promised refund sounds too good to be true, it is.
Next, get an Identity Protection PIN from the IRS: a six-digit number that stops anyone else from filing under your Social Security number, reissued each January. Apply at IRS.gov or at a local Taxpayer Assistance Center. Finally, verify any communication claiming to come from the IRS or USDA through official .gov websites, your local USDA service center, or the IRS identity theft hotline at 800-908-4490. If you suspect a scam, report it at phishing@irs.gov or to the Treasury Inspector General for Tax Administration.
The agricultural community has enough to worry about before planting season. Do not let a crooked preparer or a convincing phone call add a federal investigation to the list. Verify your return, vet your preparer, and secure your identity before April 15.
This column is provided for general informational purposes only and does not constitute legal advice. Reading this column does not create an attorney–client relationship. Laws vary by jurisdiction and are subject to change. You should consult a qualified attorney for advice regarding your specific situation.
