10. Disguised corporate ownershipThe IRS says that domestic shell corporations are being formed and operated in certain states in an effort to conceal business ownership or financial activity. In this scheme, these anonymous entities are being used to facilitate long-standing tax evasion efforts, such as underreporting of income, nonfiling of tax returns, money laundering and other financial crimes. The IRS is working with state authorities to identify abusive entities and bring their owners into compliance.
11. Misuse of trustsTrusts are a legitimate and frequently used financial planning tool where a taxpayer's money is controlled and managed by an independent trustee. In many cases, they do offer tax advantages. But the urge to cut taxes, combined with insufficient understanding of IRS trust requirements, often makes taxpayers easy marks for self-styled experts promising to reduce or eliminate taxes through illegal trust investments.
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.
12. Improper charitable deductionsThe abuse of charitable organizations and taxpayer deductions to improperly shield income or assets from taxation remains on the latest tax scam list this year.
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 payIt'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 more 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.