TOP DRAWER ARTICLE

Tax Scams
by
HL Carpenter

The IRS is once again warning taxpayers to be wary of scams and schemes promising to save you tax dollars – usually for a hefty fee. While there are legitimate ways to trim your tax bill, nothing on this list qualifies.

1. Zero Wages – Attaching a form to your tax return showing little or no wages or income in an effort to contradict information on forms filed by employers or other income providers.

2. Tax Abatement – Using Form 843 to fraudulently reduce previously assessed taxes.

3. Offshore Transactions – Hiding income in offshore banks to avoid taxes.

4. “No Gain” Deductions – Attempting to eliminate adjusted gross income by claiming an itemized deduction for the same amount.

5. Charitable Donations – Obtaining a tax deduction without giving up control of the asset donated.

6. Trust Misuse – When a promoter attempts to convince you a transfer of assets into a trust will lower your tax burden.

7. Zero Return – Filing a false return with all zeros, or entering withholding - but zero income - on your tax return.

8. Phishing – You receive a phony email (supposedly from the IRS) trying to trick you into giving out private information.

9. Tax Preparer Fraud – Unscrupulous tax preparers promise large refunds or charge exorbitant fees for tax preparation.

10. Dishonest Credit Counseling Agencies – Promoted as a way to ‘fix your credit rating’, this con’s giveaway is high fees and few services.

11. Employment Tax Evasion – Schemers try to convince employers they can avoid paying employment taxes on employee’s wages.

12. Frivolous Arguments – False claims about the legality of income tax laws.

For more information on these and other illegal schemes, visit http://www.irs.gov/.

Originally published March 2006.

Last update: December 30, 2009