IRS Obtains More Than 100 Injunctions Against Tax Scheme Promoters
Below is a MRR and PLR article in category Finance -> subcategory Taxes.
IRS Achieves Over 100 Injunctions Against Tax Scheme Promoters
The IRS, in partnership with the Department of Justice, has successfully obtained over 100 civil injunctions against promoters of illegal tax avoidance schemes and fraudulent tax preparers since a crackdown began in 2001. These injunctions require promoters to stop preparing tax returns and surrender client lists, strengthening the battle against tax fraud.
In the last four years, the government has intensified its fight against tax fraud by utilizing civil powers to halt activities such as:
1. Abusive Trusts: These schemes transfer assets out of a taxpayer’s name while maintaining their control.
2. Misuse of Corporation Sole Laws: Creating fake religious organizations to evade taxes.
3. Frivolous Section 861 Arguments: Avoiding employment taxes through baseless claims.
4. False Deductions: Claiming personal expenses as business deductions.
5. Zero Income Tax Returns: Filing returns that falsely report no income.
6. Disabled Access Credit Abuse: Improper claims to exploit this credit.
7. Foreign-Source Income Claims: Arguing that only foreign income is taxable.
The IRS identifies abusive tax promoters through various methods, including investigations, media research, and referrals from tax professionals. Upon finding evidence supporting a civil injunction, the IRS refers the case to the Department of Justice. If the Justice Department agrees, they file a lawsuit to stop the fraudulent activities, potentially resulting in temporary or permanent injunctions.
Currently, courts have issued 81 permanent and 18 preliminary injunctions against 99 scheme promoters, along with 17 permanent injunctions against fraudulent return preparers. Additionally, the Justice Department is pursuing 49 more lawsuits.
The IRS is actively investigating over 1,000 additional promoters for potential referral to the Justice Department and is conducting numerous examinations on participants in these schemes.
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