Highlights Of Irs List Of 2005 Tax Scams

Highlights of​ IRS List of​ 2018 Tax Scams
Each year,​ the​ IRS lists various scams taxpayers get caught up in​ .​
The top 2018 scams include several that manipulate laws governing charitable groups,​ abuse credit counseling services or​ rely on​ refuted arguments to​ claim tax exemptions .​
The agency is​ warning taxpayers about the​ growth of​ identity theft schemes with some particularly bold thieves even pretending to​ be IRS agents.
2018 Scam Highlights
1 .​
Credit Counseling .​
The IRS warns taxpayers to​ be careful with credit counseling organizations that claim they can fix credit ratings,​ promote debt payment agreements or​ charge high fees,​ monthly service charges or​ mandatory contributions that may add to​ debt .​
The IRS Tax Exempt and Government Entities Division has made auditing credit counseling organizations a​ priority because some of​ these tax-exempt organizations,​ which are intended to​ provide education to​ low-income customers with debt problems,​ are charging debtors large fees,​ while providing little or​ no counseling.
2 .​
Identity Theft .​
It pays to​ be choosy when it​ comes to​ disclosing personal information .​
Identity thieves have used stolen personal data to​ access financial accounts,​ run up charges on​ credit cards and apply for new loans .​
The IRS is​ aware of​ several identity theft scams involving taxes .​
In one case,​ fraudsters sent bank customers fictitious correspondence and IRS forms in​ an​ attempt to​ trick them into disclosing their personal financial data .​
In another,​ abusive tax preparers used clients’ Social Security numbers and other information to​ file false tax returns without the​ clients’ knowledge .​
Sometimes scammers pose as​ the​ IRS itself .​
Last year the​ IRS shut down a​ scheme in​ which perpetrators used e-mail to​ announce to​ unsuspecting taxpayers that they were under audit and could set matters right by divulging sensitive financial information on​ an​ official-looking Web site .​
Taxpayers should note the​ IRS does not use e-mail to​ contact them about issues related to​ their accounts.
3.Claim of​ Right Doctrine .​
In this scheme,​ a​ taxpayer files a​ return and attempts to​ take a​ deduction equal to​ the​ entire amount of​ his or​ her wages .​
The promoter advises the​ taxpayer to​ label the​ deduction as​ a​ necessary expense for the​ production of​ income or​ compensation for personal services actually rendered .​
This so-called deduction is​ based on​ a​ misinterpretation of​ the​ Internal Revenue Code and has no basis in​ law.
4 .​
No Gain Deduction .​
- Taxpayers attempt to​ eliminate their entire adjusted gross income (AGI) by deducting it​ on​ Schedule a​ .​
The filer lists their AGI under the​ Schedule a​ section labeled Other Miscellaneous Deductions and attaches a​ statement referring to​ court documents and including the​ words No Gain Realized.
5 .​
Corporation Sole .​
Participants apply for incorporation under the​ pretext of​ being a​ bishop or​ overseer of​ a​ one-person,​ phony religious organization or​ society with the​ idea that this entitles the​ individual to​ exemption from federal income taxes as​ a​ nonprofit,​ religious organization .​
When used as​ intended,​ Corporation Sole statutes enable religious leaders to​ separate themselves legally from the​ control and ownership of​ church assets .​
But the​ rules have been twisted at​ seminars where taxpayers are charged fees of​ $1,​000 or​ more and incorrectly told that Corporation Sole laws provide a​ legal way to​ escape paying federal income taxes,​ child support and other personal debts.
6 .​
Offshore Transactions .​
Despite a​ crackdown,​ individuals continue to​ try to​ avoid U.S .​
taxes by illegally hiding income in​ offshore bank and brokerage accounts or​ using offshore credit cards,​ wire transfers,​ foreign trusts,​ employee leasing schemes,​ private annuities or​ life insurance to​ do so .​
The IRS continues to​ aggressively pursue taxpayers and promoters involved in​ such abusive transactions.
7 .​
Zero Return .​
Promoters instruct taxpayers to​ enter all zeros on​ their federal income tax filings .​
In a​ twist on​ this scheme,​ filers enter zero income,​ report their withholding and then write nunc pro tunc–– Latin for now for then––on the​ return .​
The IRS takes a​ very poor view of​ this tactic.
8 .​
Employment Tax Evasion .​
The IRS has seen a​ number of​ illegal schemes that instruct employers not to​ withhold federal income tax or​ other employment taxes from wages paid to​ their employees .​
Such advice is​ based on​ an​ incorrect interpretation of​ Section 861 and other parts of​ the​ tax law and has been refuted in​ court .​
Recent cases have resulted in​ criminal convictions,​ and the​ courts have issued injunctions against more than a​ dozen persons ordering them to​ stop promoting the​ scheme .​
Employer participants can also be held responsible for back payments of​ employment taxes,​ plus penalties and interest .​
It is​ worth noting that employees who have nothing withheld from their wages are still responsible for payment of​ their personal taxes .​
The employees,​ however,​ can sue their employer for damages.
Inappropriate tax schemes come and go,​ so the​ 2018 list is​ fairly standard stuff with one exception .​
The spread of​ identity theft schemes is​ troubling,​ particularly when thieves pretend to​ act as​ IRS agents .​
The IRS does not contact people by email,​ so don't fall for the​ scam .​
Be careful out there.

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