Tax Scams

 

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The Fraud

Tax scams range all over the place from frivolous returns to willful understatement of income to outrageously false statements. Some tax cases read like a novel.

Every year the IRS publishes a list of the "Dirty Dozen" tax scams. Some items fall off the list, but there are always new ones to take their places. 2008 saw the decline of frauds surrounding "structured entity credits" and the telephone excise tax . . . and the rise of scams based on the economic stimulus payments as well as fuel tax credits.

Tax preparer frauds can cost taxpayers a bundle in penalties and offer the risk of a time-out at Club Fed.

Promoters aggressively market packages or kits claiming to show taxpayers how they can avoid paying income taxes by deducting ordinary living expenses as a "home-based business expense" when no business exists. This flagrant scheme, and a host of others, will astound you with their brazenness. Here's the most recent IRS "Dirty Dozen" list.

The Flaw

In the words of the IRS, "American taxpayers who willfully and intentionally violate their known legal duty of voluntarily filing income tax returns and/or paying the correct amount of income, employment, or excise taxes pose a serious threat to tax administration and the American economy."

The Fix

Vigorous enforcement of the law is the prescribed cure, but that takes skilled and massive manpower, often beyond the budgetary reach of the IRS. Public education pointing out the fact that taxes are the price we pay for our liberty and civilized society would be a good start. We need to instill in each generation the idea that everyone must contribute his or her fair share.