Home
>
Tax
>
Highlights of IRS List of 2005 Tax Scams

Highlights of IRS List of 2005 Tax Scams

Each year, the IRS lists various scams taxpayers get caught up in. The top 2005 scams include several that manipulate laws governing charitable groups, abuse credit counseling services or rely on refuted arguments to claim tax exemptions. The agency is warning taxpayers about the growth of identity theft schemes with some particularly bold thieves even pretending to be IRS agents.

2005 Scam Highlights

1. Credit Counseling. The IRS warns taxpayers to be careful with credit counseling organizations that claim they can fix credit ratings, promote debt payment agreements or charge high fees, monthly service charges or mandatory "contributions" that may add to debt. The IRS Tax Exempt and Government Entities Division has made auditing credit counseling organizations a priority because some of these tax-exempt organizations, which are intended to provide education to low-income customers with debt problems, are charging debtors large fees, while providing little or no counseling.

2. Identity Theft. It pays to be choosy when it comes to disclosing personal information. Identity thieves have used stolen personal data to access financial accounts, run up charges on credit cards and apply for new loans. The IRS is aware of several identity theft scams involving taxes. In one case, fraudsters sent bank customers fictitious correspondence and IRS forms in an attempt to trick them into disclosing their personal financial data. In another, abusive tax preparers used clients' Social Security numbers and other information to file false tax returns without the clients' knowledge. Sometimes scammers pose as the IRS itself. Last year the IRS shut down a scheme in which perpetrators used e-mail to announce to unsuspecting taxpayers that they were "under audit" and could set matters right by divulging sensitive financial information on an official-looking Web site. Taxpayers should note the IRS does not use e-mail to contact them about issues related to their accounts.

3."Claim of Right" Doctrine. In this scheme, a taxpayer files a return and attempts to take a deduction equal to the entire amount of his or her wages. The promoter advises the taxpayer to label the deduction as "a necessary expense for the production of income" or "compensation for personal services actually rendered." This so-called deduction is based on a misinterpretation of the Internal Revenue Code and has no basis in law.

4. "No Gain" Deduction. - Taxpayers attempt to eliminate their entire adjusted gross income (AGI) by deducting it on Schedule A. The filer lists their AGI under the Schedule A section labeled "Other Miscellaneous Deductions" and attaches a statement referring to court documents and including the words "No Gain Realized."

5. Corporation Sole. Participants apply for incorporation under the pretext of being a "bishop" or "overseer" of a one-person, phony religious organization or society with the idea that this entitles the individual to exemption from federal income taxes as a nonprofit, religious organization. When used as intended, Corporation Sole statutes enable religious leaders to separate themselves legally from the control and ownership of church assets. But the rules have been twisted at seminars where taxpayers are charged fees of $1,000 or more and incorrectly told that Corporation Sole laws provide a "legal" way to escape paying federal income taxes, child support and other personal debts.

6. Offshore Transactions. Despite a crackdown, individuals continue to try to avoid U.S. taxes by illegally hiding income in offshore bank and brokerage accounts or using offshore credit cards, wire transfers, foreign trusts, employee leasing schemes, private annuities or life insurance to do so. The IRS continues to aggressively pursue taxpayers and promoters involved in such abusive transactions.

7. Zero Return. Promoters instruct taxpayers to enter all zeros on their federal income tax filings. In a twist on this scheme, filers enter zero income, report their withholding and then write "nunc pro tunc"?? Latin for "now for then"??on the return. The IRS takes a very poor view of this tactic.

8. Employment Tax Evasion. The IRS has seen a number of illegal schemes that instruct employers not to withhold federal income tax or other employment taxes from wages paid to their employees. Such advice is based on an incorrect interpretation of Section 861 and other parts of the tax law and has been refuted in court. Recent cases have resulted in criminal convictions, and the courts have issued injunctions against more than a dozen persons ordering them to stop promoting the scheme. Employer participants can also be held responsible for back payments of employment taxes, plus penalties and interest. It is worth noting that employees who have nothing withheld from their wages are still responsible for payment of their personal taxes. The employees, however, can sue their employer for damages.

Inappropriate tax schemes come and go, so the 2005 list is fairly standard stuff with one exception. The spread of identity theft schemes is troubling, particularly when thieves pretend to act as IRS agents. The IRS does not contact people by email, so don't fall for the scam. Be careful out there.

Richard Chapo is CEO of http://www.businesstaxrecovery.com - Obtaining tax refunds for small businesses by finding overlooked tax deductions and credits through a free tax return review.

cleaning lady near Mundelein ...

In The News:

Account takeover threats go beyond stolen passwords as criminals exploit session cookies, SIM swaps and MFA fatigue to bypass your login security.

SpaceX is reportedly pursuing access to 80,000 cell sites to turn Starlink into a major wireless carrier rivaling Verizon, AT&T and T-Mobile.

Tech advocacy groups warn that foreign nationals at AI companies like OpenAI and Google pose a national security threat amid a lack of federal oversight.

Singapore researchers built the world's first touchscreen woven into clothing, surviving 50 machine washes while displaying images and responding to touch.

The Fox News AI Newsletter covers the latest artificial intelligence technology advancements, including the challenges and opportunities AI presents now and for the future.

A startup founder woke to $449 in unexpected OpenAI and Anthropic charges after stolen API keys were exploited during the "Black October" cyber wave.

Educational Testing Service hackers stole millions of California student records, but families who moved out of state years ago may also be affected.

Apple's iPhone Duo screens are cracking near the hinge just days after its $1,999 launch, and iFixit's CT scans may reveal what's going wrong.

Travel expert Katy Nastro says 50,000 American Airlines AAdvantage miles vanished from her account after someone redeemed them without permission.

Google AI Overviews can't be permanently turned off, but adding -AI to your searches and using the built-in Web filter can help bypass AI summaries.

Attaxion researchers found 30 fake Texas campaign merchandise stores traced to just two sellers hawking gear for competing Republicans and Democrats.

GM plans to debut eyes-off driving in the Cadillac Escalade IQ by 2028, but safety testing reveals how long distracted drivers take to regain control.

Data brokers assign labels predicting your health, finances and religion based on browsing and purchases, then sell those profiles to businesses.

Elon Musk says he'll give one SpaceX share to every kid in America in 2027, but key details about eligibility and distribution remain unclear.

ClearSpace UK's robotic spacecraft with giant claws will chase down dead satellites at 17,000 mph, with a 2029 launch from Scotland planned.

A fake Social Security statement phishing email uses the SSA logo and a convincing layout, but the sender's domain instantly exposes the scam.

A clean credit report doesn't mean your identity is safe. Six ways criminals can steal from you without triggering a credit monitoring alert.

Carolyn Marvin, a 78-year-old retired professor, was arrested after blocking an Uber Eats delivery robot on a Philadelphia sidewalk for months.

The Midnight Mimosa malware campaign hides inside cheap Android phone firmware, giving attackers powerful access before owners even turn devices on.

The Fox News AI Newsletter covers the latest artificial intelligence technology advancements, including the challenges and opportunities AI presents now and for the future.

Meta's Muse AI was built to manage tasks, but users are developing romantic AI relationships and even calling the AI companion their girlfriend.

A Minnesota murder suspect's notebook listed 11 people search websites, raising urgent questions about data broker opt-out and online privacy risks.

Google Universal Cart tracks price drops, surfaces promo codes and uses Google Wallet to match your best credit card rewards before checkout.

Safari's Notify Me feature and Google's price-tracking tools can monitor products and send alerts when prices drop on your iPhone or Android.

George Weiner built PACspam.org to trace who sends nonstop political fundraising texts after blocking numbers repeatedly failed to stop the messages.