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Tax fraud: how to recognize illegal tax evasion schemes

Tax season is in full swing. ForumDaily, based on the official information of the US Internal Revenue Service (IRS), tells how to protect yourself from scammers.

Photo: Shutterstock

US Tax Administration highlights such major tax law violations:

  • Intentional underestimation or concealment of income.
  • Overestimation of deductions from the taxable base.
  • Conducting double bookkeeping.
  • Making false entries in accounting books and documents.
  • Application for personal expenses as business expenses.
  • Application for false deductions.
  • Concealment or surrender to assets or income.

There are a large number of illegal tax evasion schemes. Typically, these schemes are advertised with promises to reduce or eliminate the payment of income tax and other taxes. For example, you should be alert if you hear any of the following phrases - it is likely that you are being asked to violate tax laws:

  • You will never have to pay taxes again.
  • Subtract the cost of your personal housing from the tax base.
  • Subtract your child’s education expenses from the tax base.
  • The IRS hides this information from you.
  • So new is the method that your tax preparer does not even know about it.
  • I can provide you a large refund amount.
  • Share the dependencies indicated for the earned income tax credit or borrow them.
  • Invest your funds in a trust fund and you will never have to pay taxes again.

Such promises can even sound in the local media or on the Internet under the guise of advertising investment or tax seminars. But remember, if a proposal seems too good to be reasonable, it may be an illegal tax evasion scheme.

You will never have to pay taxes again!

The guides of this “idea” may suggest that you, as an employer, DO NOT withhold federal income tax or payroll taxes from earnings paid to your employees. This scheme is based on misinterpretation of tax laws. During the trial, all versions of this scheme were rejected.

I don't pay taxes - so why would you?

Instigators may talk about not filing returns or paying taxes and then charge a fee to reveal their "secret." The secret they don't disclose is that many of them actually file returns and pay taxes - they just don't publicly admit it.

Subtract your personal housing expenses or your child’s education from the tax base

Participants in such a scheme incorrectly claim that personal expenses that are not deductible from the taxable base may be listed and deducted as expenses related to business activities by transferring property, assets or income to a trust fund, partnership or other form of company. Any investment scheme that promises the possibility of deducting such expenses from the tax base should be considered as very doubtful.

The Internal Revenue Service hides this information from you.

If there are legal deductions that you can use to reduce your taxes, the IRS wants you to find out about them and use them. The task of the Internal Revenue Service is to provide top-level services to American taxpayers: to help them understand and fulfill their tax obligations, and to ensure fair and fair application of tax legislation to everyone.

So new is the method that your tax preparer doesn't even know about it

Instigators use this wording in the hope of dissuading you from seeking professional advice on new tax laws. However, if there are new legal provisions to help reduce your tax amount, the legally active person will recommend that you seek independent professional advice. You should ask for a source link, just in case your tax preparer doesn't really know about it yet. If your investment proposal does not stand up to the impartial scrutiny of an independent third party, you should probably refuse it.

I can provide you a large refund amount ... for a fee!

Individuals promoting return schemes may ask you to “loan” your Social Security number, or give you a fake W-2 form, on which you will be entitled to a large refund amount. They may promise to share the refund amount with you. The US Internal Revenue Service detects most of these false returns for claims before they are paid. Even if a refund is paid, then, as a rule, this is revealed, and, ultimately, the participant of such a scheme has to refund the refund amount, along with significant penalties and interest.

Transfer of dependents to another person for earned income tax deduction

Unscrupulous tax preparers may "share" the child (or children) of the taxpayer, the short (s) can be listed on the tax return as a dependent (s), with another taxpayer (s) in order to provide both and others the opportunity to receive an earned income tax credit. For example, if one of his clients has four children, then it is enough for him to indicate only two to receive the maximum amount of credit. The tax filler can list the first two children on the first client's declaration and the remaining two on the other client's. The tax preparer and the client selling the dependents can share the benefits among themselves. The IRS is prosecuting individuals who prepare such fraudulent credit requests; Taxpayers participating in this may also be subject to administrative and / or criminal sanctions.

Invest your funds in a trust fund and you will never have to pay taxes again

Individuals promoting schemes of investing in fraudulent trust funds may charge for the issuance of stock documents. This amount pays for the preparation of trust documentation on behalf of the taxpayer in the name of foreign and (or) domestic trustees, offered by the sponsors of the scheme, or to foreign bank accounts and corporations. If the trust fund is legally executed, then you no longer own it and cannot use the benefits from the fund.

Multiple trust funds, partnerships or other involved organizations

The existence of a tiered organization for the purpose of investment does not necessarily imply that there is any misconduct — there may be a legitimate purpose for each organization to conduct business. But beware of schemes that use multiple levels of companies that serve no clear purpose other than hiding the true owner of assets and income.

Are these statements too good to be true?

Questions to ask yourself:

  • Is it proposed for me to do the following as part of this tax promotion:
  • Is my income incomplete?
  • Deliberately keeping silent about income?
  • Overstate the amounts deducted from the tax base?
  • Maintain double accounting records?
  • Enter falsified data into my accounting documents and other documents?
  • Treat personal expenses as business expenses?
  • List fake tax deductions?
  • Hide or move assets or income?

If you answered "Yes" on any of these questions, then you are probably participating in illegal tax evasion scheme.

The United States Revenue Service is prosecuting fraudsters in the preparation of tax returns; taxpayers taking part in this may also be subject to administrative and / or criminal penalties for violating tax laws.

Three things to keep in mind:

  1. You are responsible for the content of your tax return.
  2. Anyone who promises you a higher refund without knowing the specifics of your taxpayer situation is probably misleading you.
  3. Never sign a tax return without first examining it to make sure that the information provided is presented honestly and correctly.

Do you need more information?

If you have questions about these or other fraudulent practices, contact the United States Revenue Service (IRS) at: 1-800-829-1040. Call that phone number: 1-800-829-0433 to report fraudulent tax evasion.

More information is available on the IRS website. Select the Tax Scams / Fraud Alert option on the website IRS.gov.

Read also on ForumDaily:

How to choose a tax specialist. 9 rules from ForumDaily

When, how and where to file a tax return

Should you file a tax return?

What if you can't pay your taxes on time

5 best tax return filing programs: an overview

Miscellaneous United States Revenue Service Educational program taxes in the USA
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