TIME TO END THE DIRTY DOZEN
Each year the IRS publishes what they believe are the dozen biggest tax evasion schemes—the Dirty Dozen. The list of schemes changes from year-to-year but will continue as long as there is an income/payroll tax system. Maybe some of the people employing these schemes are really criminals, but most of the taxpayers using these schemes are protesting against the present income/payroll tax system and want to lower their federal income tax liability.
Here are the 2023 Dirty Dozen:
1. Employee Retention Credit claims
- Many groups are advertising that companies can get a credit for retaining their employees during the Covid pandemic and often instruct the companies to file false and incorrect claims that, even if paid, will be overturned when reviewed by the IRS. The Company will then be subject to penalties and interest even though they followed the advice of the promoters. The IRS has suspended the program for now.
- Additionally, some of these advertisements are from scammers looking to collect the taxpayer's personally identifiable information in exchange for false promises. The scammers then use the information to commit identity theft.
2. Phishing and smishing
- Fake communications from those posing as legitimate organizations in the tax and financial community, including the IRS and the states, arrive in the form of an unsolicited text (smishing) or email (phishing) to lure unsuspecting victims to provide valuable personal and financial information that can lead to identity theft.
- The IRS initiates most contacts through regular mail and will never initiate contact with taxpayers by email, text or social media regarding a bill or tax refund.
3. Online account help from third-party scammers
- Swindlers pose as a "helpful" third party and offer to help create a taxpayer's IRS Online Account at IRS.gov that provides taxpayers with valuable tax information.
- The intent is to steal a taxpayer's personal information.
4. False Fuel Tax Credit claims
- The fuel tax credit is meant for off-highway business and farming use and, as such, is not available to most taxpayers.
- Unscrupulous tax return preparers and promoters are enticing taxpayers to inflate their refunds by erroneously claiming the credit.
5. Fake charities
- Scammers set up these fake organizations to take advantage of the public's generosity. They seek money and personal information, which can be used to further exploit victims through identity theft.
- Taxpayers who give money or goods to a charity might be able to claim a deduction on their federal tax return if they itemize deductions, but charitable donations only count if they go to a qualified tax-exempt organization recognized by the IRS.
6. Unscrupulous tax return preparers
- People should watch for common warning signs, including charging a fee based on the size of the refund.
- A major red flag is when the tax preparer is unwilling to sign on the dotted line as required by law and has the individual sign as if they prepared it without help.
7. Social media: Fraudulent form filing and bad advice
- Social media often circulates inaccurate or misleading tax information.
8. Spearphishing and cybersecurity for tax professionals
- Phishing is a term given to emails or text messages designed to get users to provide personal information.
- Spearphishing is a tailored phishing attempt to a specific organization or business.
- A successful spearphishing attack can ultimately steal client data and the tax preparer’s identity, allowing the thief to file fraudulent returns and get refunds.
9. Offer in Compromise Companies
- Offers in Compromise help people who can't pay to settle their federal tax debts.
- But some companies promote Offers in Compromise to people who clearly don't meet the qualifications, frequently costing taxpayers thousands of dollars in fees and no IRS settlement.
10. Schemes aimed at high-income filers
- Charitable Remainder Annuity Trust (CRAT): Charitable Remainder Trusts are irrevocable trusts that let individuals donate assets to charity and draw annual income for life or a specific period. Promoters promise benefits that don’t exist and can result in large penalties to the taxpayer.
- Monetized Installment Sales: Since, today, income is only taxed when received from the sale of an asset, some promoters offer to pay the seller the full amount owed in the installment sale but claim that it does not trigger income. This can lead to penalties and interest.
11. Bogus tax avoidance strategies
- Syndicated conservation easements: A conservation easement is a restriction on the use of real property. Generally, taxpayers may claim a charitable contribution deduction for the fair market value of a conservation easement transferred to a charity if the transfer meets the requirements of Internal Revenue Code 170.
- Some abusive arrangements, which generate high fees for promoters, overvalue the easement and grossly inflate tax deductions for the taxpayer resulting in disallowance of the deduction and penalties and interest charged to the taxpayer.
12. Schemes with international elements
- Offshore accounts and digital assets:
- The IRS continues to identify individuals who attempt to conceal income in offshore banks, brokerage accounts, digital asset accounts and nominee entities.
- Asset protection professionals and unscrupulous promoters continue to lure U.S. persons into placing their assets in offshore accounts and structures, saying they are out of reach of the IRS. These assertions are not true. The IRS can identify and track anonymous transactions of foreign financial accounts as well as digital assets.
- Maltese individual retirement arrangements misusing treaty: U.S. citizens or residents contribute to foreign individual retirement arrangements in Malta (or potentially other host countries).
- The U.S. taxpayer improperly claims an exemption from U.S. income tax on gains and earnings in and distributions from the foreign individual retirement plan.
CONCLUSION
The Internal Revenue Code (IRC) is extremely complicated and also very unclear. This is why there is an opportunity for many of the tax schemes described above to attract investors. They generally appear to be in compliance with the code and even many legitimate tax advisors don’t see anything wrong.
If the scheme is improper but not audited, then there is a benefit to the taxpayer. In fact, many of these schemes have been promoted as never being contested by the IRS. Too often, this just means that they were not audited or audited by an unsophisticated IRS auditor.
The only real loser is the taxpayer who may find out a few years later that not only do they owe the income taxes they supposedly “saved” but also penalties and interest that can equal the amount of income taxes.
These schemes provide work for the IRS, the bureaucrats and tax professionals. None of these people ask the obvious question—WHY DO WE HAVE AN INCOME TAX SYSTEM THAT IS SO PRONE TO ABUSE? WHY DO WE HAVE AN INCOME TAX SYSTEM THAT IS IMPOSSIBLE TO EASILY UNDERSTAND—EVEN BY TAX PROFESSIONALS?
When the FAIRtax is passed and there is no longer a federal income/payroll tax and no IRS, think how easy our lives will be!
Sure, there will be criminals that will try to find a way to improperly avoid paying the FAIRtax—just like there are always going to be criminals who can’t or won’t work and must steal from others.
Here is the difference, today many taxpayers that invest in “tax shelters” have some basis for the decision because of the complexity and lack of specific rules in the tax code.
The FAIRtax is very simple. If you make a retail purchase of a new product or retail service, it is taxable. Since less than 10% of the nation’s retailers account for 90% of the retail purchases, there is little chance for evasion for most taxpayers. These large retailers are not going to risk getting caught doing anything illegal.
Today, if you pay cash to a repairman, it is the repairman’s obligation to report the income.
Under the FAIRtax, the repairman that’s providing a retail service will be required to collect the FAIRtax. If he fails to collect the FAIRtax from the customer, that transaction violates the law—simple and easy. But in that case, it’s the repairman who failed to collect the FAIRtax that’s in trouble. Not the customer who didn’t pay the tax.
When we pass the FAIRtax there will no longer be an IRS that audits and extorts taxpayers.
There will be some people in D.C. who will be needed to monitor the FAIRtax collections from the states. However, the IRS, 260 million tax returns and countless wasted American taxpayer hours spent trying to comply will be gone.
The only reason to have the complex income/payroll tax system is to give jobs to bureaucrats, give D.C. control how much of our incomes we get to keep and to provide politicians an ATM machine to finance their campaigns.
Why would D.C. pass the FAIRtax and give up this almost unlimited source of donations? The only way that they will is if the rest of us demand it!
Congress and D.C. know that there is a better alternative to the present system—the FAIRtax.
Instead of spending time and money doing endless hours of paperwork that don’t create anything of value to yourself, your family or the nation, why not eliminate the unnecessary waste?
The FAIRtax transfers power from the government and bureaucrats to the people. We, not the bureaucrats and D.C., decide how much tax we pay.
Isn’t it time to end this ludicrous tax collection system and the IRS?
When the FAIRtax is enacted, there will be no need to fear being audited by the IRS or raided by armed IRS agents because there will be no more IRS.
There is going to be a vote on the FAIRtax in the House of Representatives. McCarthy and the other elites didn’t want it, but it was forced on them.
We now have the opportunity to force all Members of the House to show where they stand. They can:
- Vote for the present income/payroll tax system or for the FAIRtax.
- Support the corrupt income tax and the IRS or eliminate it. It can’t be any simpler than that.
- Hide the true cost of their government or pass the FAIRtax and show everyone the true cost of government on each retail receipt.
- Support the largest transfer of power from government to the people, the FAIRtax, or not.
If Members think that the FAIRtax needs to be changed, then they can propose the change. Don’t let them reject the entire bill because it has a “flaw” that can be easily addressed.
Please stand with us and demand that your representative support a much fairer, much simpler and much more efficient way to fund the government—the FAIRtax!
The FAIRtax doesn’t pick winners and losers. Because it taxes spending, not earnings, the FAIRtax lets everyone save for their retirement tax free.
The FAIRtax will allow us to TAKE BACK CONTROL.
The income/payroll tax system is broken and no longer working—we can’t repair it but we can replace it with the FAIRTAX!
Join us and TAKE BACK CONTROL OF OUR COUNTRY AND OUR LIVES—NOT WITH BULLETS BUT WITH THE ELIMINATION OF ONE OF THE BIGGEST THREATS TO OUR LIBERTY AND ECONOMIC PROSPERITY—THE INCOME/PAYROLL TAX.
We all should remember Edmund Burke’s warning that applies to our efforts to TAKE BACK CONTROL,
“Nobody made a greater mistake than he who did nothing because he could do only a little.”
We should also remember this quote from George Orwell's 1984, which, if we do nothing, may foretell your and your children's future:
“If you want a picture of the future, imagine a boot stamping on a human face—forever.”
WHAT CAN EACH OF US DO?
We can write letters and make calls to our elected representatives and attend Zoom town hall meetings demanding that if they really want to allow Americans to “TAKE BACK CONTROL”, the first step is to eliminate the income/payroll tax system and enact the FAIRTAX!
TAKE BACK CONTROL! Help us PASS THE FAIRTAX!
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