Highlights of IRS List of 2005 Tax Scams
Below is a MRR and PLR article in category Finance -> subcategory Taxes.
Highlights of IRS List of 2005 Tax Scams
Overview:
Each year, the IRS releases a list of scams that taxpayers may encounter. The 2005 list includes manipulations of charitable laws, abuse of credit counseling services, and false tax exemption claims. A significant concern is the rise of identity theft schemes, with some culprits even impersonating IRS agents.Key Tax Scams in 2005:
1. Credit Counseling Abuse:
- Be wary of credit counseling organizations that promise to fix credit ratings, promote debt payment plans, or charge hefty fees and mandatory contributions, which may worsen debt issues. The IRS is prioritizing audits of these organizations, especially when they exploit low-income customers by charging high fees with minimal counseling.
2. Identity Theft:
- Protect your personal information carefully. Scammers have stolen personal data to access financial accounts, accrue credit card charges, and apply for loans. Some schemes even involve fake IRS correspondence or tax forms to steal financial information. Notably, the IRS does not use email for contacting taxpayers about their accounts.
3. "Claim of Right" Doctrine:
- This scam involves filing a return claiming a deduction equal to the total wages, falsely labeling it as a necessary expense for income production. This interpretation of the tax code is incorrect and lacks legal support.
4. No Gain Deduction:
- Taxpayers try to eliminate their adjusted gross income by deducting it on Schedule A, citing court documents and claiming "No Gain Realized." This tactic is baseless.
5. Corporation Sole:
- Individuals falsely apply for incorporation as religious leaders to evade taxes. While intended to separate church assets legally, these laws are misrepresented in seminars, wrongly promoting tax evasion.
6. Offshore Transactions:
- Despite crackdowns, some continue to hide income in offshore accounts, using foreign trusts and other means. The IRS actively targets those involved in such illegal practices.
7. Zero Return:
- Promoters advise filing returns with all zeroes, or using "nunc pro tunc" (meaning "now for then"). The IRS strongly disapproves of this approach.
8. Employment Tax Evasion:
- Some schemes instruct employers not to withhold federal employment taxes, citing incorrect legal interpretations. Such advice has led to criminal convictions. Employers can be penalized for unpaid taxes, and employees are still liable for their own taxes. They can also sue employers for damages.
Conclusion:
While tax schemes evolve, the 2005 list highlights familiar tactics, with identity theft being particularly alarming due to impersonations of IRS agents. Remember, the IRS never contacts through email. Stay vigilant and protect yourself from scams.You can find the original non-AI version of this article here: Highlights of IRS List of 2005 Tax Scams.
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