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Tax issues to avoid from the IRS “Dirty Dozen” list

On Behalf of | May 28, 2018 | IRS Issues

Tax scams seem to be everywhere, and they are most in evidence during income tax season.

The Internal Revenue Service compiles an annual list of “Dirty Dozen” tax scams. Here are five schemes from the 2018 list that taxpayers at various levels might encounter:

1. ID theft

Top priority for everyone is thwarting identity theft. The IRS has put a significant amount of work into the detection of identity theft relative to income tax returns. The agency will pursue anyone who uses another person’s identity to file a fraudulent return.

2. Frivolous arguments

Some scammers try to goad taxpayers into filing frivolous returns to avoid paying tax, using often-outlandish schemes. There is a $5,000 penalty for filing a frivolous return.

3. Excessive business credits

Do not claim the fuel tax credit, as it can only be used by off-highway businesses, such as a farming concern. You should also avoid using the research credit on your return, as specific requirements apply to the reporting of research expenses.

4. Tax shelter abuse

Steer clear of anyone who tries to sell you a tax shelter; these are usually complex schemes that sound too good to be true. If you are at all interested, run them by your attorney for review.

5. Offshore cheating

The IRS has been cracking down on offshore issues, such as hiding income in foreign banks, then accessing the funds by the use of credit cards or wire transfers. Many U.S. taxpayers have taken advantage of the Offshore Voluntary Disclosure Program to come clean about their financial dealings outside the country, but that program is due to end on September 28, 2018.

Looking at options

Keep in mind that every taxpayer is responsible for the information presented on his or her tax return. An attorney experienced with helping taxpayers resolve debt issues with the IRS will tell you that options are always available to avoid tax liens, bank levies and other penalties. In the meantime, paying attention to the “Dirty Dozen” tax scams is a good way to ensure you do not run afoul of the Internal Revenue Service.