Tax Avoidance Schemes

Tax avoidance schemes have long been misunderstood by taxpayers. The IRS' publication 3995 called Recognizing Illegal Tax Avoidance Schemes outline different ways tax avoidance schemes could appear to taxpayers. Most tax avoidance schemes appear to have tax saving benefits that are too good to be true and yes they are not true and the IRS will penalize if caught. Many taxpayers think that the IRS are out to get them for tax avoidance schemes. However, most taxpayers that buy into the concept outlined by these tax avoidance schemes don't even realize that they are victims.

Benefits and selling points tax avoidance schemers use

Some of these phrases may be familiar to taxpayers who have been or were almost victims of tax avoidance schemes. While some tax reduction strategies may be honest, there are way too many tax avoidance schemes and if you want to get into a tax reduction strategy, you better ensure that it is not one of the illegal tax avoidance schemes heavily penalized by the IRS with stiff penalties and interest.

"Never pay taxes again"

"Deduct the cost of your personal residence"

"The IRS doesn't want you to know about this"

"I can get you a big refund"

"Share or borrow EITC (earned income tax credit) dependents"

"Put your money in a trust and never pay taxes again"

Illegal strategies to avoid taxes

• underreporting income
• intentionally omitting income
• overstating the amount of tax deductions
• keeping two sets of books
• making false entries in your books and records
• claiming personal expenses as business expenses
• claiming false deductions
• hiding or transferring assets or income

My tax preparer filed my tax return with some of these tax avoidance schemes, will I be penalized?

The IRS heavily prosecutes any tax preparers who make fraudulent claims and using any tax avoidance schemes. Taxpayers can also be subject to civil and/or criminal tax penalties if false claims or fraudulent, illegal tax avoidance schemes are used on their tax returns. Overall, even if the taxpayers use the services of tax preparers, they are still responsible for the content of their tax returns. Both the tax preparers and the taxpayers can be penalized.

Reporting tax avoidance schemes

If you have questions on any tax avoidance schemes, you can contact the IRS at 1-800-829-1040. To report a tax avoidance scheme, call 1-800-829-0433 or 1-866-775-7474 or email irs.tax.shelter.hotline@irs.gov.