IRS Releases 2022 Dirty Dozen Scams: Here is our summary of these findings.
Every year, the IRS observes the most rampant tax scams. These dominate attempts by taxpayers to avoid paying taxes required of them. The IRS calls these tax scams the “dirty dozen.” In 2022, after completing another hectic tax season, the IRS’ dirty dozen list concluded with the message from the IRS warning taxpayers to avoid unlawful tricks that lead to tax avoidance. Illegal tax avoidance is tax evasion, which is punishable by law, which is why the department of justice (DOJ) has a good number of examples of individuals and small business owners getting indicted for tax fraud, tax evasion, and money laundering.
Even though the IRS is increasingly surveying low to middle-income earners for tax fraud, the annual dirty dozen list of tax scams usually shines the spotlight on high-income earners. They engage in many bogus tax avoidance strategies that the IRS is aware of. However, to note is the fact that these high-income earners are approached by bogus tax professionals who promise them to pay no taxes – only that they do everything illegally without the knowledge of their clients. For this reason, I always urge all taxpayers to ensure that they hire a tax professional registered with the IRS. It’s easy to check if they are registered. You just need to go to THIS LINK and search if the person telling you that they are a tax pro is really registered with the IRS.
Nevertheless, what tax scams dominated the 2022 tax season?
Hiding assets in offshore accounts.
It’s like what you see in the movies, except this time, it’s in real life, which can turn the tables against perpetrators. This is because the IRS is increasingly upping its surveillance game, which will lead to more arrests and convictions. Other taxpayers are not only hiding assets offshore but are buying cryptocurrency, hoping to evade paying taxes. However, cryptocurrency is increasingly becoming something that the IRS can monitor and attain all transactional information, including how much crypto traders spend on crypto platforms.
The IRS knows that some individuals and entities use offshore banks, brokerage accounts, or nominee entities to evade taxes. Even though bogus accountants and tax professionals may sell this idea as something their clients can use to evade taxes, the IRS can beat them at their game. This has been happening going back for decades; what more now, with the IRS investing in more technology and analysts? You can find convictions of such cases going back to 2009 when the DOJ published a conviction involving offshore accounts. These were used to hide named taxpayers’ income so that they avoid paying taxes.
Some high-income individuals just don’t file taxes.
The IRS is also riled by individuals earning more than $100,000 who decide not to file taxes. They get this advice from bogus tax professionals who tell them they can get away with it. But the truth is you can only get away with it if you, indeed, do not owe any taxes for the year. But if you earn so much money, the safest way is to always file in time, even if you think you do not owe. If somehow, the IRS discovers you owe taxes and did not file, you could be in trouble. And, if you did not file because of what the IRS may deem to be fraudulent reasons, your penalty could increase from 5% per month to 15% of the unpaid taxes.
Abuse of tax law.
In this scam, bogus tax professionals and their clients abuse the provision of the tax law allowing for conservation easements. They take inflated appraisals for undeveloped land, for example, and use them with fictitious partnerships to get massive deductions. Bogus promoters get taxpayers together, sell these arrangements, and they get massive fees or commissions for putting together the ‘deals.’ However, when the arm of the law catches up with them, taxpayers will be left to deal with this on their own. Again, the IRS has the means to identify such scams and persecute involved taxpayers. It said that tens of billions of dollars have been fraudulently claimed using hundreds of syndicated conservation easement deals. Many of these have been taken to court. Therefore, think twice before getting involved in these syndicated conservation easement deals.
Fraudulent insurance schemes.
This arrangement is promoted by bogus accountants, wealth planners, or promoters. They persuade closely-held entity owners to participate in fake or abusive micro-captive insurance arrangements. But these insurance arrangements will lack many insurance attributes and may involve very high premiums used to evade tax law. However, the IRS has also increased surveillance against such insurance schemes. It has also successfully convicted taxpayers who have used this to evade taxes before.
Conclusion: Why you should avoid listening to bogus tax professionals.
Using offshore accounts to evade taxes may seem lucrative, or other scams such as bogus micro-captive insurance schemes, etc., could be attractive to you. But this only benefits bogus promoters who come to taxpayers with all this information. They earn huge commissions from these illegal activities and disappear. Some of them advertise on social media platforms and even have websites set to make unsuspecting taxpayers believe they are legitimate. But taxpayers should be vigilant and protect themselves from engaging in their activities.
This is because bogus promoters, accountants, wealth managers, or tax professionals can do more harm to you. First, they leave you to deal with the IRS alone when you eventually get caught and receive a notice from the IRS. Secondly, they may also get away with your sensitive information. And, because these promoters are already fraudsters, they can use your sensitive information, such as your name and social security number, to carry out more tax fraud and other crimes. That is why vigilance is required when trying to save money on taxes. You need to make sure you hire a trusted tax professional registered with the IRS. And if your accountant suggests any of the above, immediately fire them and find someone who would ensure that you only use legal tax strategies and file taxes the right way. I can help you do that. Contact my team if you want to never fear facing an IRS audit or penalty in the future.
