The IRS Loves Us! They Really Love Us! Read Their Warnings on Tax Scams

I have had some great experiences dealing with the IRS, especially when a client was present.  One time I walked in with a client who was the daughter of a well-known actor.  She actually resembled her father, too.  The first thing the IRS appeals agent said was, “I have been a fan of your father for years!”  I knew we had just won our case.  In fact, within ten minutes we had agreed with the IRS agent on excellent terms.

Then my client start talking, and talking, and talking….I kicked her under

the table.  Luckily, this stopped the vocal hemoraging before any real damage was done.

Even though the IRS is our adversary many times, they also put out some items trying to protect the taxpayer from unscrupulous people.  The IRS 2010 Dirty Tax Scams  listed areas where taxpayers can be screwed by someone other than the IRS.  It actually is very informative:

1. Return Preparer Fraud:  Unfortunately some tax preparers skim off their client’s refunds.  Other preparers tell clients that they can get big refunds, and end up preparing a bad return that creates problems down the line.  Check out your tax preparer.  I have corrected many.
2. Hiding Income Offshore:  This is a no-brain-er. Don’t play games.  I turned down a client who wanted me to prepare financial statements for a questionable offshore insurance vehicle.
3. Phising:  Anytime you get an email, phone call, or letter from the IRS, do not disclose any information no matter how threatening they sound.  Call a professional to check it out.  The IRS never calls for information like a credit card to pay taxes over the phone.  Ask their permission to record the conversation and see how fast they hang up.
4. Filing False and Misleading Forms:  The low income earned income tax credit is a favorite by schemers.  The IRS is having a hard time tracking them down.  Also, phony forms 1099 (OID).
5. Non-taxable Social Security and withholdings: I have not pesonally seen this.
6. Abuse of Charitable Organizations and Deductions: As a co-founder of FOLA (Foundation of Local Arts), I can tell you the IRS makes you jump through a lot of hoops for your 501(c) (3) letter.  If you plan to star an organization, find a good tax lawyer.
7. Frivolous Arguments: Don’t listen to scheming ideas and constitutional arguments.  Remember, taxes pay the courts.  They are certainly not going to buy your argument that Congress does not have the right to tax.
8. Abusive Retirement Plans: Don’t over contribute to your IRAs, and have a pension professional help set one up for you.
9. Disguised Corporate Ownership: Nevada corporation and you live in LA?  Sure, the California Franchise Tax Board is looking for you.  The IRS wonders why, too.
10. Zero Wages:  This is a new one to me.  Using forms to correct W-2s and 1099s as a way of hiding income.
11. Misuse of Trusts: Private Annuity Trusts, and foreign trusts to deduct private expenses are fertile ground for the IRS.
12. Fuel Tax Credit Scams: If you run a business with vehicles, look out.  Claiming an unreasonable amount will put you on the radar.

So, the IRS does have some value other than take your money.  Tax scams will always be here, so arm yourself with professionals and don’t do anything without consulting us.

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IRS CIRCULAR 230 NOTICE: To ensure compliance with requirements imposed by the U.S. Department of the Treasury and Internal Revenue Service, we inform you that any tax advice contained in this e-mail (including any attachments) is not intended or written to be used, and may not be used, for the purpose of (a) avoiding penalties under the Internal Revenue Code or state tax authority, or (b) promoting, marketing, or recommending to another party any transaction or matter addressed herein.