My Home About Me

The IRS just released the twelve top scams to avoid this tax season. In the hope that it helps you save money and avoid grief, my translation of the IRS&39;s explanations follows. 

1. Phony phone refunds being claimed as part of the special Telephone Excise Tax Refund available to most taxpayers this year. The IRS says it&39;s "actively investigating" tax preparers who are preparing inflated refund requests. We may not like them, but the folks who work for the IRS are not jerks. I wouldn&39;t want my return to look out of line in this area.
2. Abusive Roth IRAs: Don&39;t bite if someone proposes a scheme where you shift under-valued property to Roth IRAs to save on taxes.
3. Phishing, a technique familiar to regular Creditbloggers, is used by identity thieves to acquire personal financial info from unsuspecting folks so that they can run up charges on stolen credit cards, or apply for loans in the names of those they&39;ve scammed. Sometimes pretending to be from the IRS itself, these crooks send out emails trying to trick consumers into disclosing private information. If you have any doubt about whether a contact from the IRS is authentic, call 800-829-1040.
4.   Shell corporations are becoming active in certain states to disguise ownership, avoid paying taxes, and under-report profits. The various branches of government are working together on this. Here&39;s hoping … but really … is it so hard to find a way to do something legit?
5. Zero Wages: This scam is a little dizzying to me, probably because of all the bureaucratese it entails. Somehow,  a Form 4852 ("Substitute Form W-2") or a "corrected" Form 1099 is submitted that shows zero or little income. Sometimes, taxpayers are encouraged to rebut past wages and taxes, refer to the IRS Code sections 3401 and 3121, and include a reference to a fear of IRS retaliation for bureaucratic mistakes. Clear as mud, huh? Stay away!
6. Tax Preparer Fraud: Dishonest preparers can cause a lot of grief. They make money by skimming some of their clients&39; refunds and charging inflated fees. They promise huge refunds – from not only this year, but past years, too.  "If it sounds too good to be true, it probably is." Choose wisely, based on personal recommendations from people you trust.
7. American Indian Employment Credit: While there&39;s an Indian Employment Credit available for businesses that employ Native Americans or their spouses, there is no provision for its use by employees. So Native Americans, watch out for this scam – and also for the good old standby, where you&39;re told you aren&39;t subject to federal income taxation. The latest variation has gone online. (See the advice on phishing, above.)
8. Trust Misuse: While some trusts makes sense for tax and probate avoidance purposes, there are plenty of scammers out there promising to reduce income taxes and raise deductions -- as well as cut estate taxes -- if you sign on the dotted line right now. Not so fast!  Take the time to get plenty of expert advice before you set up a trust.
9. Structured Entity Credits: This one, newly identified by the IRS and crooked through and through, really burns me up! According to the IRS, scammers set up partnerships to own and sell "state conservation easement credits, federal rehabilitation credits and other credits. The purported credits are the only assets owned by the partnership and once the credits are fully used, an investor receives a K-1 indicating the initial investment is a total loss, which is then deducted on the investor’s individual tax return."
10. Abuse of Charitable Organizations and Deductions: The IRS keeps its eyes on the tempting practices of using tax-exempt organizations to "improperly shield income or assets from taxation." Don&39;t put an unrealistic price tag on what you donate, and don&39;t expect a non-profit to let you continue to control your gift. Finally, "the IRS is noticing the return of private tuition payments being disguised as charitable contributions to religious organizations." I&39;m not sure how this would work, but if you&39;re doing it, you better stop.
11. Form 843 Tax Abatement: This is another popular bureaucratese scam that, according to the IRS, "rests on faulty interpretation of the Internal Revenue Code." The filer asks for the abatement of previously assessed tax using Form 843. "Many using this scam have not previously filed tax returns and the tax they are trying to have abated has been assessed by the IRS through the Substitute for Return Program. The filer uses the Form 843 to list reasons for the request. Often, one of the reasons is: &39;Failed to properly compute and/or calculate IRS Sec 83-Property Transferred in Connection with Performance of Service.&39;" I say stay away from Form 843!
12. Frivolous Arguments: Typical statements including:
    

•  The Sixteenth Amendment concerning congressional power to lay and collect income taxes was never ratified
•  Wages are not income
•  Filing a return and paying taxes are merely voluntary
•  Being required to file Form 1040 violates the Fifth Amendment right against self-incrimination and/or the Fourth Amendment right to privacy

Uncle Sam says doesn&39;t believe these or other similar claims. "These arguments are false and have been thrown out of court. While taxpayers have the right to contest their tax liabilities in court, no one has the right to disobey the law."

The best piece of tax advice that I know comes down from Judge Learned Hand: "There is nothing sinister in so arranging one&39;s affairs as to keep taxes as low as possible …" To which I add this helpful reminder from an old hippie friend of mine: "Don&39;t do the crime if you can&39;t do the time."

What tax advice do you have to offer – to do or not to do?!

January Affect   Amateur Investors   Dow Performance   emini's S&P 500   economic data   earnings   Biotech HOLDR (BBH)   Technical chart patterns   support/resistance levels   ETFs (exchange traded funds)   Deron Wagner   trading   Finding a market bottom   Emini's Nas 100   Exchange Traded Funds   ETFs   investing   Relative strength ETF trading   Market Vectors Russia ETF   Inflation