- Hiding income offshore: The IRS is cracking down on people who evade U.S. taxes by hiding their money in offshore banks, brokerage accounts or nominee entities and then use debit cards, credit cards or wire transfers to get to their funds. Ditto with people who use foreign trusts, employee-leasing schemes, private annuities or insurance plans to shirk their tax bills.
- Bogus charities: A perennial scam that crops up whenever there's a big natural disaster. Scammers impersonate charities to draw out money and private information from taxpayers who think they're making a tax-deductible contribution. Bottom line: Only deal with recognized charities.
- False information: Beware of reporting false income, expenses or exemptions on your tax return to get a bigger refund. If you're caught, you'll be on the hook for the erroneous refund, including interest and penalties, and you could be criminally prosecuted, the IRS says.
- Frivolous arguments: The IRS is not a big fan of these, so if you're tempted to say that you don't owe taxes because they're voluntary or you didn't get due process or some other goofy argument, it won't work.
- The "zero wages" lie: In this fraud, the taxpayer submits a Form 4852 (a substitute W-2) or a "corrected" Form 1099 to make their income look lower and avoid paying taxes. The IRS takes a dim view of this and could hit you with a $5,000 penalty.
- Abusive tax structure: This is a rich guy scheme in which the taxpayer uses domestic and foreign trust arrangements and the financial secrecy of foreign countries and offshore banks to avoid paying their fair share. The IRS says these schemes are characterized by the use of Limited Liability Companies (LLCs), Limited Liability Partnerships (LLPs), International Business Companies (IBCs), foreign financial accounts and offshore credit or debit cards.
- Misuse of trusts: Not all trusts are bad, but the IRS is on the hunt for unscrupulous promoters who urge people to transfer large amounts of assets – including cash, investments and ongoing businesses – into a private annuity or foreign trust just to avoid paying taxes. If this is you, be careful. Seek the advice of a trusted professional.
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