Number 11 on the IRS Dirty Dozen list is to beware of abusive tax avoidance schemes. Tax scammers love to promote bogus tax schemes aimed at reducing taxes or avoiding them altogether.
The IRS has recently seen tax schemes ranging from abusive deals involving broadcasted conservation easements and micro-captive insurance arrangements. They have also noticed an increase in an international component, such as hiding cash and digital assets offshore.
Tax schemes with international elements are becoming a high priority for the IRS as they continue to see taxpayers attempting to hide assets in offshore accounts and accounts holding digital assets, such as cryptocurrency. To complement their enforcement investigations, the IRS requires individuals holding foreign assets and third parties to report to the IRS their foreign assets, accounts, entities and digital assets.
IRS Commissioner Danny Werfel stated “Sometimes taxpayers are conned into believing they can participate in these schemes. People should always look for advice from an independent, trusted tax professional, not a promoter focused on aggressively marketing and pushing questionable transactions”.
These scam promotions continue to lure U.S. taxpayers into placing their assets in offshore accounts and structures, attempting to convince them that they are out of reach of the IRS. As well as promoting that digital assets are untraceable and undiscoverable by the IRS. Both assertions are not true. The IRS can identify and track anonymous transactions of foreign financial accounts as well as digital assets.
Commonly, these tax schemes are advertised online and have one thing in common, they promise tax savings that are too good to be true and likely cause legal harm to honest taxpayers.
The IRS warns anyone thinking about using one of these schemes – or similar ones – that the agency continues to improve investigation and enforcement in these areas by utilizing new and evolving data analytic tools and enhanced document matching.
The IRS also created the Office of Fraud Enforcement (OFE) and Office of Promoter Investigations (OPI) to coordinate service-wide enforcement activities against taxpayers committing tax fraud and promoters marketing and selling abusive tax avoidance transactions and schemes to effectuate tax evasion.