The IRS recently updated its list of the most notorious tax scams, the "Dirty Dozen." "Taxpayers should be wary of scams and promises to avoid paying taxes that seem too good to be true," Acting IRS Commissioner Linda Stiff said in reference to the Dirty Dozen. "There is no secret formula that can eliminate a person's tax obligations. People should be wary of anyone peddling any of these scams," she indicated. The 2008 list includes the following:
Phishing. This tactic is used by Internet-based thieves to trick victims into revealing personal information and then using it to access the victim's financial accounts.
Economic stimulus payment scams. Scam artists trick individuals into revealing personal financial information by making promises related to economic stimulus rebate payments.
Frivolous arguments. Frivolous scheme promoters encourage people to make unreasonable and unfounded claims to avoid paying the taxes they owe. Taxpayers who file a return or make a submission based on a frivolous position are subject to a $5,000 penalty.
Fuel tax credit scam. Some taxpayers are claiming a fuel tax credit when their nontaxable use, occupation, or income level makes the claim unreasonable.
Hiding income offshore. Some individuals try to avoid paying U.S. taxes by illegally hiding income in offshore bank and brokerage accounts, or using offshore debit cards, credit cards, wire transfers, foreign trusts, employee leasing schemes, private annuities, and life insurance plans. The IRS and state and U.S. possession tax agencies aggressively pursue those using and promoting these scams.
Abusive retirement plans. The IRS is looking for transactions taxpayers use to avoid the limits on Roth IRA contributions, among other retirement plan abuses.
Zero wages. Taxpayers file a phony wage or income-related information return to replace a legitimate return as an illegal method to lower the amount of taxes owed.
False claims for refund and abatement requests. This practice involves filing a false refund or tax abatement claim form.
Return preparer fraud. Dishonest preparers cause problems for taxpayers falling victim to their schemes.
Disguised corporate ownership. Domestic shell corporations are used to underreport income and for money laundering, financial crimes, and terrorist financing.
Misuse of trusts. Unscrupulous promoters urge taxpayers to transfer assets to trusts to save taxes, but don't deliver as promised.
Abuse of charitable organizations and deductions. Abuses include arrangements to improperly shield income from taxation, attempts by donors to maintain control over donated assets or income from donated property, overvaluation of contributed property, and tuition payments disguised as contributions.
Please contact us if you are approached concerning any of these abusive tax schemes. We remain diligent in our efforts to minimize your tax bill using every possible legal measure within the tax code.
