Here’s the third (and final) part of the top twelve tax scams… Today’s installment covers four more common ways that tax filers try to cheat.
Offshore transactions: It may be an ongoing battle for the IRS, but tax cheats are still prone to hiding income in offshore bank and brokerage accounts. In the fiscal year 2005, the IRS reported 68 individuals were convicted for promoting or using different schemes to avoid paying taxes.
Trust misuse: As much as you would like to believe that putting your assets into a trust will result in lower income taxes, deductions or reduced estate or gift taxes, think again. Many trusts do not deliver such tax benefits. Speaking with a professional first is the best move before transferring any funds, the IRS advises.
Employment tax evasion: Employers aren’t innocent either. Based on some shabby advice, some business owners have not collected federal income or other employment taxes from workers. But the IRS warns that those employers would face payment of those back taxes as well as penalties and interest.
‘No Gain’ deduction: And rounding out the list of tax con artists maneuvers is to claim deductions that equal their adjusted gross income, propped up by phony court documents.
My thoughts: Am I the only one that thinks 68 is an awfully small number of people when it comes to convictions for the use of offshore accounts to avoid taxes? As far as employers not withholding taxes from their employees, I can’t believe this would be all that common — there’s a tremendous amount to be lost here, and very little to be gained. Finally, am I getting this right? People are claiming deductions that offset their entire AGI? Wow. That’s gutsy (and more than a little stupid).