In abusive
trust transactions, taxpayers
transfer assets into trusts
but don't see any of the advertised
benefits, such as a reduction
of income subject to tax,
deductions for personal expenses
paid by the trust and a decrease
in gift or estate taxes. The
IRS has recently seen an increase
in the improper use of private
annuity trusts and foreign
trusts to divert income and
deduct personal expenses.
Don't simply take any tax trust sales pitch at face value. Before entering any trust arrangements, seek the advice of a trusted tax professional.
The IRS says it continues to observe arrangements where a taxpayer moves assets or income to a tax-exempt supporting organization or a donor-advised fund, but maintains control over the assets or income. The filer then claims a tax deduction for the gift without actually providing a benefit to the charity.
In other cases, the organization receiving the donation promises that the donor can purchase the items back at a later date at a price the donor sets. The Pension Protection Act of 2006 imposed increased penalties for inaccurate appraisals and new definitions of qualified appraisals and qualified appraisers for taxpayers claiming charitable contributions.
Beware or be ready to pay
It's bad enough that scam victims, believing promises of lower tax bills, end up losing cash. But even worse, they subsequently find themselves in deeper debt to the IRS. The reason: Even if you are duped, federal law requires you pay your rightful taxes plus any penalty charges and back interest that accrued because of your use of dubious tax-relief techniques.
IRS offices
across the country are keeping
tabs on these Dirty Dozen tax
scams but warn that additional
cons are out there. Some schemes
might not be as active as others,
and the IRS says taxpayers should
remain wary because old scams
often resurface or evolve. And
the absence of a particular
scheme from the annual blatant
scam list should not be taken
as an indication that the IRS
is unaware of it or not taking
steps to counter it.
To make sure, if you encounter any of these schemes, or are approached with a new one, the IRS wants to know. Report suspected tax fraud by calling (800) 829-1040.
And remember: If you are ever offered a "surefire"
tax-saving opportunity, it never hurts to be a little
skeptical.
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Updated: April 17, 2009 |
