In our previous blog post, we had highlighted 6 of the first 12 scams present in IRS’ Dirty Dozen List for the year 2019.
The Dirty Dozen is a list of possible tax scams, released annually by the IRS, to help taxpayers take the necessary precautions and save themselves from getting scammed by fraudulent criminals.
Let’s have a look at the remaining 6 tax scams you need to watch out for this tax season:
- Falsely Padding Deductions in Returns
Taxpayers need to avoid attempting to inflate tax deductions by falsifying their income and financial details while filing returns.
Providing false information can lead to heavy penalties when discovered and do more harm than good.
- Fake Charities
The IRS has always been vocal about warning taxpayers to keep a watch out for fake charitable organizations.. Often, groups claiming to be nationally acclaimed organizations solicit money out of unsuspecting donors and end up swindling innocent people to part with their hard-earned money. The IRS has released a detailed paper on the matter and it is advisable to go through it once before making any type of contributions.
- Offshore Tax Avoidance
With the IRS running a tight ship when it comes to tracking down offshore accounts and assets of taxpayers with the help of FBAR examinations, it is indeed a bad idea to even try and hide your foreign assets during your return filing.
- Excessive Claims For Business Credits
It is in your favor to avoid trying to claim unnecessary tax credits like the Fuel Tax credit, which is applicable to a very limited portion of taxpayers. This is important because the IRS verifies all the claims made with thorough background research and such behavior can result in penalties for the taxpayer.
- Frivolous Tax Arguments
Often shady people attract taxpayers and promote frivolous tax arguments on the basis of outlandish claims and encourage taxpayers to take up these issues in court.
They base such bogus claims on the legality of tax payments but end up getting turned down by the courts. Such claims, even though they might sound helpful, can actually get the taxpayer in deep water. The IRS generates a fine up to $5,000 for such hollow claims.
- Abusive Tax Shelters
Tax structures considered abusive such as trust funds and syndicated conservation easements are often used to avoid tax payments.
The ever-changing privacy laws of offshore banks often reveal a host of foreign tax evasion policies and tricks which allows taxpayers to enjoy a reduced tax liability. Trust funds often use layers of shell corporations and entities, which are disregarded when it comes to the US tax policy, to hide the true ownership of the assets in question.
This essentially allows the owner the luxury of claiming a host of tax credits and deductions using various options like purported mortgages or rental agreements.
What the taxpayers need to be aware of is that most of the promises thus made to ensure tax deductions, are never going to be fulfilled.
Taxpayers engaged in foreign trust transactions are usually subject to significant information reporting and a failure to do so can lead to heavy penalties.
These scams are on the priority list as far as the IRS is concerned. Anyone engaging in such activities – intentionally or otherwise stand to lose a lot, both in terms of money and even jail time in certain cases.
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