Are you concerned with someone trying to scam you while pretending to lower your taxes? There’s good reason to be worried. This is a report on five common kinds of tax ripoff I’ve seen while defending my clients against the IRS.
No one likes to pay taxes and that’s why there are so many tax ripoffs. The crooks know that you ‘want to believe.’ But this isn’t Disneyland, a tax scam you unknowingly participate in can turn in to IRS fines or even land you in jail.
Because of this, it’s important to know about these scams so you can avoid them. There’s a second reason you need to defend yourself against these people which I’ll get to in a minute.
First let’s look at the kinds of ripoffs and scams my clients experience most often:
Top 5 Tax Ripoff or Scam Reports
- Improper Home-Based Business Expense
- Identity Theft
- Off Shore Tax Haven Ripoff
- Tax Avoidance Ripoffs such as ‘Frivolous Arguments’
- Tax Savings Scheme like the ‘Share/Borrow Dependents’
You can read more about these tax ripoffs and scams (plus some others) here on my article called The IRS Dirty Dozen.
Let’s look at one popular tax ripoff from the list above that’s been driving a lot of complaints with the IRS lately.
Improper Home-Based Business Expenses
This scheme purports to offer tax ‘relief’ but in reality is illegal tax avoidance. The promoters of this scheme claim that individual taxpayers can deduct most, or all, of their personal expenses as business expenses by setting up a bogus home-based business. But the tax code firmly establishes that a clear business purpose and profit motive must exist in order to generate and claim allowable business expenses. Even when you have a legitimate home-based business high deductions in this area are a known audit trigger.
Spotting a Ripoff
Are there common denominators for a tax ripoff?
Thief’s like to use legitimate tax and financial advice that’s in the news. Like the small business tax breaks you might have heard about for a home-based business. Home-based businesses are a great legitimate tax break so naturally the media highlight it. Ripoff artists play on this media coverage to give their tax scam an air of legitimacy.
Which leads me to the second point about why it’s important to know about these ripoffs. The thief’s know you are much less likely to report them out of fear you’ll get in trouble with the IRS yourself. Fear is a strong lever that they’re only too happy to exploit.
Many advice columns point out that if something sounds too good to be true, it probably is. Then again, if people could follow this advice reliably then people would never fall victim to scams…
My advice is easier to get right. I recommend you visit the IRS web site to search their latest Tax Fraud Alerts. If you’re still not sure, consult an experienced tax preparer or tax lawyer like yours truly. If you prefer the phone, give me a call at 1-800-509-2770.
Until next time,
Jeffrey I. Fouts, Tax Attorney
Here’s a bio of sorts. I’m happily married with two kids. I’m a real small town tax lawyer (Ellijay, pop. 1,584) not some fictional marketing character. I represent tax payers before the IRS in all 50 states. I have 18 years experience, thousands of satisfied clients, about 8 critics at last count, and an A+ BBB Rating. I’m a member in good standing of the bar and have active memberships in courts from Georgia to Washington D.C. My competitors may covet my Google ranking but my clients covet my sound counsel. I deal directly with my clients and have a small, tireless staff. You can put off your tax problem, or put us to work.
