Don’t Get Scammed - IRS Lists Dirty Dozen Tax Scams
The Internal Revenue Service came out with its list of the dirty dozen tax scams to avoid. The IRS has put out such a list each year for the past several years.
On this year’s list are some ways to avoid being taken in by scams, whether for your personal tax situation or business taxes.
But mostly, I think the IRS just wants to remind people to avoid getting into a mess by engaging in dodgy tax schemes and outright frauds. And if your tax advisor suggests one of these activities, think about getting a new tax advisor. It’s not worth having your life turned upside down by IRS troubles. It’s not only bad for your business, it’s bad for your marriage, your health and your freedom.
OK, the editorial is over. Now here are a few items on that dirty dozen list:
- Phishing scams - you know better than to respond to those emails asking you to send information to the “IRS”, right? Because it’s not really the IRS sending them. The IRS says it NEVER communicates via email about taxes.
- Hiding income offshore — And of course you already know that you shouldn’t be setting up that account in the Caymans to avoid paying taxes. Says the IRS, “Individuals continue to 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 or life insurance plans.” As long as people have to pay taxes, there will be a tiny minority who try to hide their money offshore. But with today’s electronic records, I would think it gets increasingly easy for the IRS to track this kind of activity and harder to hide your trail.
- Disguising corporate ownership – Better not use shell corporations to disguise your business activity to avoid paying taxes. This is another technique that’s as old as the hills, but apparently it is still alive and well. The IRS website notes, “Some people are going as far as forming domestic shell corporations in certain states for the purpose of disguising the ownership of a business or financial activity. Once formed, these anonymous entities can be used to facilitate underreporting of income, non-filing of tax returns, engaging in listed transactions, money laundering, financial crimes and even terrorist financing.”
Read the entire Dirty Dozen list over at the IRS website if you want all the details. There’s even a podcast you can listen to.
