The agency doesn’t just warn the public about scammers in its annual epistle. It also reminds us to watch our own behavior and, of course, comply with all applicable tax laws.
Included on the “Dirty Dozen” tax scams, which I’m summarizing here, is Offshore Tax Avoidance. You have a responsibility under U.S. law to declare your foreign accounts to the U.S. Treasury.
In case you think you can get away with it, think twice. Federal authorities have negotiated agreements with most other countries to exchange data on foreigners owning accounts. Simply put, your ownership record of foreign accounts will be provided by foreign governments to the US government. Consider that there are substantial penalties attached to the failure to disclose. You are likely better off disclosing, if only to avoid the penalties. In an effort to give taxpayers an opportunity to come clean, the IRS offers its Offshore Voluntary Disclosure Program.
Here are some other key takeaways:
- It seems obvious, but the IRS warns taxpayers not to hide taxable income by filing false Form 1099s or other fake documents. Using false documents in an attempt to reduce your tax bill or inflate tax refunds is a huge red flag, the IRS says.
- The government warns against excessive claims for certain credits such as Fuel Tax Credits. “The fuel tax credit is generally limited to off-highway business use, including use in farming,” the IRS says. It is not available to most taxpayers.
- The IRS wants you to stay away from anyone who promises to reduce taxes by inflating refund claims.
- It says you should avoid people peddling tax shelters that sound too good to be true.
- The IRS also tells you to make sure that the charities you give to are real. In particular, beware of charities that have names similar to nationally known organizations. According to the government, the irs.gov site has the tools to verify the status of charitable organizations.
In summary, be aware of all potential scams, and make sure that you yourself do not engage in behavior that the IRS considers questionable. And when considering programs that reduce taxes aggressively ask yourself the question: is it too good to be true?