Don't Get Pulled In by Tax Scams

· American Indian Employment Credit. This scam reminds me of a scheme in which African Americans were persuaded they were entitled to a slavery tax credit. Thousands of African Americans were duped into filing for refunds for a nonexistent "slave reparations" tax credit. Now the schemers are moving on to Native Americans, who are encouraged to submit returns claiming their taxable income should be reduced because of an American Indian employment or treaty credit. It's a lie. It might sound believable because there is an Indian Employment Credit. The intent of this credit is to give businesses an incentive to hire certain individuals who live on or near an Indian reservation. This credit is available for businesses that employ Native Americans or their spouses. In a somewhat similar scam, unscrupulous promoters have informed Native Americans that they are not subject to federal income taxation.

· Trust Misuse. This is a tried-and-true tax scam in which promoters get taxpayers to transfer assets into trusts. They promise reduction of income subject to tax, deductions for personal expenses and reduced estate or gift taxes. However, some trusts do not deliver the promised tax benefits. There are more than 150 abusive trust investigations underway, and 49 injunctions have been obtained against promoters since 2001, according to the IRS. The IRS has been aggressive in cracking down on these types of illegal trusts.

In all these cases, don't try to play innocent when it comes to a fraudulent tax return. "If you sign your return, you are liable," says Edward Smith, a tax partner in the Boston accounting firm BDO Seidman.

"You should carefully go through and make sure every item that relates to your tax return is true," Smith said.

You would think this advice is obvious. But looking at the Dirty Dozen, it is clear that many people don't mind cheating.

· On the air: Michelle Singletary discusses personal finance Tuesdays on NPR's "Day to Day" program and online athttp://www.npr.org.

· By mail: Readers can write to her at The Washington Post, 1150 15th St. NW, Washington, D.C. 20071.

· By e-mail:singletarym@washpost.com.

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