Watch Out for the ‘Dirty Dozen,’ Warns IRS
IRS Commissioner Mark W. Everson says tax scams can take many forms and be
promoted by many types of people. But the IRS says there are 12 that
taxpayers should be on the lookout for.
By Stanley H. Block
The Internal Revenue Service
refers to them as the “Dirty Dozen.”
They are the 12 most common
tax scams available these days. They can be promoted by a career conman, a
businessman, even a neighbor. But the trick is not to get fooled.
Everybody has to pay taxes. It’s the way it is.
Still, tax scam promoters are
relentless. To give you an idea of what you might expect to see promoted,
here are the top five schemes on the “Dirty Dozen” list:
-
Trusts — Although
the IRS has been aggressively cracking down on trusts for years, they
still remain the most popular tax scam. Promoters tell taxpayers to
transfer assets and income into the trusts, effectively hiding the money
from the IRS while still maintaining access to it. Since some trusts are
indeed legal, taxpayers should consult a professional before using one.
-
Frivolous Arguments
— These outlandish arguments includes claims that the Sixteenth
Amendment concerning congressional power to lay and collect income taxes
was never ratified; that wages are not income; and that filing a return
and paying taxes are merely voluntary. No matter how creative a
taxpayer’s frivolous argument, it won’t work.
-
Return Preparer Fraud
— Dishonest return preparers make money by skimming a portion of a
clients’ refund, and they bring in taxpayers with claims of enormous
refunds. Taxpayers, beware!
-
Credit Counseling
Agencies — The IRS is currently investigating some of these
tax-exempt credit-counseling organizations. They were intended to
provide education to low-income customers with debt problems, but some
are instead charging debtors large fees and providing little or no
counseling.
-
“Claim of Right”
Doctrine — Using this scheme, a taxpayer files a return and attempts
to deduct an amount equal to his/her entire wages, claiming it as “a
necessary expense for the production of income.” This so-called
deduction is based on a misinterpretation of the law.
The lesson taxpayers should
take is to beware! Scam artists abound. Unfortunately, taxpayers lured by
promises of big refunds are often unsuspecting targets.
In today’s scamming world,
the best advice you can get is only from a qualified tax professional.
Stanley H. Block is a Maryland State Tax
Attorney and a member of the American Society of IRS Problem Solvers. You
can contact him at 410-727-6006 to obtain a free subscription to his newsletter
titled The IRS Times & Inquirer.
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