TAX SCAMS AND HOW TO AVOID THEM

IRS Tax ProblemsIRS News

Participating in illegal schemes to avoid paying taxes can result in imprisonment and fines, in addition to, repaying the taxes (plus penalties and interest).

 

The IRS is engaged in extensive efforts to stop abusive tax shelter schemes. The IRS has an entire division devoted to this. It is known as the Tax Exempt and Government Entities Division of the IRS. The IRS regulations provide that a taxpayer must disclose certain transactions known as “listed transactions” by filing a disclosure statement (form 8886) with its tax return.

 

A “listed transaction” is a transaction that is the same as or substantial similar to one that the IRS has determined to be a tax avoidance transaction, and has been identified by the IRS through its notice or other form of published materials. Anyone participating in listed transactions may be required to disclose the transactions as required by the regulations.

 

Some of the transactions which the IRS has identified as listed transactions are as follows:

 

1).        Abusive Roth IRA’s transactions.

 

2).        401K accelerated deductions.

 

3).        Deductions for excessive Life Insurance and a section 412, I or other defined benefit plan.