|
|
Highlights of IRS List of 2005 Tax Scams
Each year, the IRS lists various scams taxpayers get caught up in. The top 2005 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.
2005 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 2005 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. Be careful out there.
Richard Chapo is CEO of BusinessTaxRecovery.com - We recover overpaid business taxes for small businesses. 80% are due refunds of $5,000 to $10,000 on past tax filings. How much you are owed? |
| Irs Related News
|
Related Articles
- History Of Taxes In America
The first attempt to impose an income tax on America occurred during the War of 1812. After more than two years of war, the federal government owed an unbelievable $100 million of debt. To pay for this,...
- Taxability of Social Security Benefits
The IRS determines whether your Social Security benefits are taxable by looking at your total income and marital status. Form SSA-1099, which Social Security recipients should receive by January 31, shows...
- Tax Fraud
What is tax fraud, and how does our government control it? That's a really big question to answer, so let's break it apart and answer it in two different paragraphs. Tax fraud is the intentional avoidance...
- W-2s
There has never been a more welcomed term in the adult taxpayer's life, than the invention of the W-2 and January 31st; let's take a moment to examine the W-2, and what it really means to the average taxpayer....
- Choosing A Business Tax Service
There are a number of ways that you can find tax services companies. The yellow pages is a good place to start for companies in your area but, depending on where you live, the list of names may be extremely...
- IPA Reveals CPA Firm Trends, Record Growth
Sept 12, 2006 — The nation's 100 largest public accounting firms saw fees grow a record-breaking 16.5 percent for fiscal year 2005-2006, and all 100 experienced positive growth, according to a new report....
- Do not let IRS make you Wait for the Wrong answer.
It's widely known that, if you hit a snag while doing your taxes you can call IRS for answers and you if you wait long enough you will get an answer, but is it the right answer?Quote: "Two years ago it...
- A Big Tax Loophole Just Got Bigger
Believe it or not, there are ways to convert taxable incomeinto non-taxable income, without any fear of an IRS audit.Here's one of my favorites. It's been part of our belovedtax code for over 30 years,...
- Is Your Ebay Income Taxable?
The income you get from selling items on eBay is just like the income you get from any other business: it is taxable, at least in theory. In practice, many get away without declaring profits from their...
- Tax Invoice
A tax invoice is a legal document that offers a look at what the GST is for a transaction. Read on to learn about your obligations for issuing, holding, and supplying the different types of tax invoices.You...
- Identity Theft - Impacting Your Taxes?
If your identity is stolen, your finances can quickly become a nightmare. A less obvious problem is the effect identity theft can have on your taxes.Identity TheftGenerally, thieves steal your personal...
- Tax Fraud Attorneys
Tax fraud is a white collar crime involving offenses like tax evasion, non filing of tax returns, non declaration of income and assets, misrepresentation of conditions for exemption, forgery, and any other...
- Personal Exemptions
Thanks to the complexity of the United States tax codes, the system itself, and the variations of tax codes from state to state, completing your personal tax return and maximizing your deductions and exemptions...
- How To Turn Business Losses Into Cash Flow
By Christopher Raynalwww.masteraccountants.co.nzYou have permission to publish this article electronically or in print, free of charge, as long as the bylines are included. A courtesy copy of your publication...
- Federal Income Tax
Federal income tax is withheld from the pay of almost all employees. Employee pay is inclusive of salaries and wages, bonuses, commissions, and vacation allowances. It is the responsibility of the employer...
- Failure To Pay Employment Taxes - Penalties
As an employer, you must pay employment taxes if you have employees. Fail to pay and the IRS will rain all over your parade. PenaltiesIf you have employees, you absolutely must deduct and withhold various...
- How The Gift Tax Works
Each year millions of Americans give a gift to other individuals that they know. Gifts can be considered anything from a new vehicle, to a trip, to a piece of land. A gift tax is a tax that is imposed...
- There Is No Such Thing As Tax Simplification!
I'm a little upset right now, so please bear with me. Idon't get upset very often - you can always tell becausesmoke starts coming right out of the top of my bald head! -but I'm here to tell ya', this...
- How Likely Are You To Be Audited?
Statistics for IndividualsUnfortunately, the IRS increased its rate of auditing individuals in 2003 when compared to 2002. The increase was approximately 14%, but still constituted only 6.5 audits for...
- Employment Taxes - Depositing With The IRS
If your business has employees, you must pay employment taxes. The payment system can be a bit confusing, so this article discusses how to go about depositing employment taxes with the IRS.Depositing Employment...
- Getting a Tax Credit for Your Kids
As you know, raising a family is a full time job and can put stress on your finances. Fortunately, you can claim a tax credit to help cut your IRS bill if you have kids.Getting a Tax Credit for Your KidsWith...
- When to use Quicken for Mutual Fund Recordkeeping
While you might assume any mutual fund investor should use Quicken's mutual fund record-keeping tools, that isn't the case. Because investment record keeping, including mutual fund record keeping, requires...
- Earned Income Credit
This is perhaps one of the best ways the government has introduced, to date, to raise families out of poverty, while requiring them to remain productive citizens. The Earned Income Credit is a refundable...
- Know A Tax Cheat? Get Paid To Tell The IRS
According to the IRS, taxpayers underpay their taxes by some $300 billion. If you know someone that is contributing to that deficit, the IRS may be willing to pay you up to $10 million for the information...
- Low-Tax States Have Stronger Economies
A new study of state tax burdens ound that low-tax states outperform the higher tax states in employment, personal income and population.The report, entitled "High Taxes Lower Economic Performance," was...
- Tax Evasion
What is tax evasion, and how does our government control it? That's a really big question to answer, so let's break it apart and answer it in two different paragraphs. Tax evasion is the intentional avoidance...
- Federal Income Tax Deduction
The American laws are great fun to play with if you know how to handle them, but better be sure you know the rules, or else you fall into trouble.The federal income tax deduction is a statutory requirement...
- The Principles On Paying Tax
Why Tax Loop Holes Must ExistA long long time a go, in a country far far away, in China to be exact, there was a hunter that put nets in 4 sides of the forest. The hunter wanted to catch all animals. Then...
- Tax Quotes and Jokes for Tax Season
Like death, paying taxes is inevitable. In the case of most Americans, tax season is just around the corner. If only paying taxes was so easy.As you begin pulling out those receipts, the eraser and reading...
- Understanding Basic Tax Terms
If your like many, you don't always understand what people are talking about when it comes to Taxes. It's important to know the main tax terminology, especially when tax season comes around. Knowing the...
- Deciding when to File a Tax Return?
April 15th - "The Day of Reckoning"! Every year, millions of Americans get ready to pay taxes to Uncle Sam, or get ready to collect a tax refund from Uncle Sam; when did this become the great day that...
- Innocent Spouses - Relief from Taxes
Historically, tax issues arising from bad marriages fell into the category of "better or worse" for marriages. The IRS granted no innocent spouse tax relief, but has changed its views.Tax ReliefWhen a...
- New for 2006, the Roth 401k Plan
One of the new tax strategies available in 2006 is the Roth 401k. A taxpayer may place up to $15,000 ($20,000 if age 50 or older) in a Roth 401k instead of a regular 401k plan in 2006. The 401k plan needs...
| | |
