Every year many innocent people fall victim to tax scams. Taxpayers may be taken advantage of by scammers, dishonest tax preparers, or may have their identity stolen by other means. There are more opportunities for criminals to find sensitive information about people now in the Digital Age. Read below to learn about common tax scams that are expected to affect taxpayers this year and share the information with your friends and family to help spread awareness:
A self-directed IRA is an IRA held by a custodian that allows investments in a broader class of assets than allowed by most IRA custodians, such as real estate, promissory notes and private placement securities. Because they normally include such alternative assets, the risk and rewards of self-directed IRAs may be greater than those of traditional IRAs.
Self-directed IRAs are becoming increasingly common, and while there are many legitimate investments available, there is more risk of investors becoming defrauded due to the nature of the assets involved.
To help raise public awareness of how to avoid fraud, the Retirement Industry Trust Association and the North American Securities Administrators Association are offering a free webinar on July 18 at 2:00 p.m. Eastern. Click here to register.
Among the topics to be discussed are:
Owners of self-directed IRAs should also be careful when purchasing and operating rental real estate within the IRA, as violations of a "prohibited transaction" could trigger tax penalties.
Promoters of tax avoidance scams are not only acting illegally, but they can put unknowing participants at risk of penalties and even jail time. The old saying "if it seems to good to be true, it probably is" certainly applies here, but plenty of celebrities have fallen prey to such schemes, including Wesley Snipes.
There are plenty of legitimate tax reduction techniques available, but when someone tells you he can help you avoid taxes altogether, I recommend running for the hills. You can also report the scam and its promoters to the IRS. Think of it this way - the less tax cheats out there, the more money our government gets, and theoretically, anyway, the less likely it is to raise taxes on the rest of us.
The IRS has released its annual list of tax scams for taxpayers to watch out for - review this list to help educate and protect yourself. Believe it or not, the IRS wants to help!
Video: Dirty Dozen: English | Spanish | ASL
WASHINGTON –– Hiding income in offshore accounts, identity theft, return preparer fraud, and filing false or misleading tax forms top the annual list of “dirty dozen” tax scams in 2011, the Internal Revenue Service announced today.
“The Dirty Dozen represents the worst of the worst tax scams,” IRS Commissioner Doug Shulman said. “Don’t fall prey to these tax scams. They may look tempting, but these fraudulent deals end up hurting people who participate in them.”
The IRS works with the Justice Department to pursue and shut down perpetrators of these and other illegal scams. Promoters frequently end up facing heavy fines and imprisonment. Meanwhile, taxpayers who wittingly or unwittingly get involved with these schemes must repay all taxes due plus interest and penalties.
Following is the Dirty Dozen for 2011:
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From IR-2010-32:
WASHINGTON — The Internal Revenue Service today issued its 2010 “dirty dozen” list of tax scams, including schemes involving return preparer fraud, hiding income offshore and phishing.
“Taxpayers should be wary of anyone peddling scams that seem too good to be true,” IRS Commissioner Doug Shulman said. “The IRS fights fraud by pursuing taxpayers who hide income abroad and by ensuring taxpayers get competent, ethical service from qualified professionals at home in the U.S.”
Tax schemes are illegal and can lead to imprisonment and fines for both scam artists and taxpayers. Taxpayers pulled into these schemes must repay unpaid taxes plus interest and penalties. The IRS pursues and shuts down promoters of these and numerous other scams.
The IRS urges taxpayers to avoid these common schemes:
Continue Reading...Have you ever heard a friend, neighbor, or colleague state that they had found a way to get around paying income taxes, or that certain taxes weren't really legal? Don't believe them - many people, including several wealthy actors, have gotten into trouble with the IRS that way.
The IRS has a comprehensive analysis of frivolous tax arguments on its website.
Video: Watch Out for Tax Scams: English | Spanish | ASL
WASHINGTON — The Internal Revenue Service reminds consumers to avoid identity theft scams that use the IRS name, logo or Web site in an attempt to convince taxpayers that the scam is a genuine communication from the IRS. Scammers may use other federal agency names, such as the U.S. Department of the Treasury.
In an identity theft scam, a fraudster, often posing as a trusted government, financial or business institution or official, tries to trick a victim into revealing personal and financial information, such as credit card numbers and passwords, bank account numbers and passwords, Social Security numbers and more. Generally, identity thieves use someone’s personal data to steal his or her financial accounts, run up charges on the victim’s existing credit cards, apply for new loans, credit cards, services or benefits in the victim’s name and even file fraudulent tax returns.
The scams may take place through e-mail, fax or phone. When they take place via e-mail, they are called “phishing” scams.
The IRS does not discuss tax account matters with taxpayers by e-mail.
The IRS urges consumers to avoid falling for the following recent schemes:
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Here's a great article from Santa Barbara attorney Mark Cornwall - Beware the Pros at Cons. Occasionally clients ask me about such arrangements, and, of course, and I inform them that's it's a bunch of baloney. Remember - if it sounds to good to be true, it most likely is!
Tax scammers are creative - calling on telephone as well as sending emails. Heres a liink to a recent list of scammers' ploys from the IRS.
The elderly are particularly vulnerable, so if you have an aging relative, make sure you alert them.
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