Have you ever received an email from a “Nigerian Prince” offering you money? How about a mailer informing you that you’ve “won” $1.5 million? Or phone calls to discuss your car’s “extended warranty”? Sometimes it can feel like there’s a fraudster lurking around every corner. Most of the time, when we’re faced with a potential scam, our guard is already up. The red flags go off in our heads, and we get a gut feeling that tells us to proceed with caution.
But, when tax season rolls around, the red flags and gut feelings may already be naturally present. With an estimated 52% of U.S. adults feeling stressed and anxious about the tax-filling process, fraudsters are preying upon those fears – and they’re getting creative. Every year, the IRS publishes its “Dirty Dozen” list, which lays out the 12 worst tax scams. For 2022, the IRS has identified the following four transactions, which they categorize as “potentially abusive arrangements”:
- Misapplication of Charitable Remainder Annuity Trust (CRAT) rules to eliminate taxable gain.
- Misuse of tax treaties through Maltese (or other foreign) pension arrangements.
- Entering into fraudulent Puerto Rican or other foreign Captive Insurance transactions.
- Inappropriately using the installment sale rules by receiving proceeds through alleged loans.
These four schemes work by falsely manipulating the tax code. Fraudsters hope your eyes glaze over just reading the four items listed above. These fake “tax professionals” want you to believe they are here to help you when they are here to help themselves. If you’re part of the 61% of the population that hires a tax professional to prepare your taxes and correctly interpret the code, we are genuinely here to help. We can maximize deductions that legally lower your tax burden using our expert knowledge. If you’ve received tax advice that feels “too good to be true,” a second opinion may be worth it, especially when civil fraud penalties are on the line.