IRS Tax Tip 2019-48, April 25, 2019
This is the second tip of two tips recapping the list of the IRS’s annual “Dirty Dozen” list of top 12 tax scams. Thieves work throughout the year – often aggressively – to scam taxpayers.
The schemes run the gamut from simple refund inflation scams to complex tax shelter deals. A common theme throughout all: scams put taxpayers at risk.
Here is a recap of the final six scams in this year's Dirty Dozen. Each one includes a link where taxpayers can go to learn more about that scam.
Falsely Padding Deductions on Returns: Taxpayers – especially those filing this summer after getting a filing extension – should avoid the temptation to falsely inflate deductions or expenses on their tax returns to pay less than what they owe or potentially receive larger refunds.
Fake Charities: Groups masquerading as charitable organizations solicit donations from unsuspecting contributors. Donors should be wary of charities with names similar to familiar or nationally-known organizations. Contributors should take a few extra minutes to make sure their hard-earned money goes to legitimate charities. IRS.gov has the tools taxpayers need to check out the status of charitable organizations.
Excessive Claims for Business Credits: Business owners should avoid improperly claiming the fuel tax credit, a tax benefit generally not available to most taxpayers. The credit is usually limited to off-highway business use, including use in farming. Taxpayers should also avoid misuse of the research credit. Improper claims often involve failures to participate in or substantiate qualified research activities or satisfy the requirements related to qualified research expenses.
Offshore Tax Avoidance: Successful enforcement actions against offshore cheating show it’s a bad bet to hide money and income offshore. People involved in offshore tax avoidance are best served by coming in voluntarily and getting caught up on their tax-filing responsibilities.
Frivolous Tax Arguments: Frivolous tax arguments may be used to avoid paying tax. Promoters of frivolous schemes encourage taxpayers to make unreasonable and outlandish claims about the legality of paying taxes despite being repeatedly thrown out in court. The penalty for filing a frivolous tax return is $5,000.
Abusive Tax Shelters: Abusive tax structures – including trusts and syndicated conservation easements – are sometimes used to avoid paying taxes. The IRS is committed to stopping complex tax avoidance schemes and the people who create and sell them. The vast majority of taxpayers pay their fair share, and everyone should be on the lookout for people peddling tax shelters that sound too good to be true. When in doubt, taxpayers should seek an independent opinion regarding complex products they are offered.