Shah CPA Firm, PLLC

IRS Dirty Dozen List - tax avoidance and fraud alerts. The IRS publishes its latest "Dirty Dozen" annually to alert taxpayers of the top tax avoidance and fraud schemes going around. It is helpful to be aware of these schemes two-fold: 1) don't be a victim of the scheme itself, and 2) don't get on the bad side of the IRS and the punitive fraud-related penalties or criminal charges.

I have tried to organize the most current IRS Dirty Dozen List (2023) in the following categories: 

- consumer-related fraud

- high-income filer fraud

- abusive tax avoidance 

- international related schemes

Our practice places ethics and family values as the top 2 manners in going about business and life. To that end, you can be sure that everything is on the up and up when you engage our practice. In fact, may times clients bounce ideas off Neeraj Shah, attorney and CPA, and we discuss best practices to not only minimize taxes but also manage risk.

IRS DIRTY DOZEN - tax avoidance and fraud list

Consumer-related Fraud (9):

1. Unscrupulous tax return preparers - Think twice before falling victim to a preparer who 1) invents false income to claim a tax credit, 2) claims false deductions to increase refunds, 3) directs refunds into some other bank account, 4) claiming to be a CPA when the preparer is not or 5) most common a preparer who does not include his or her signature, name or PTIN on your return (they just want your money without any accountability - run away... fast). 
2. Smishing and Phishing - The IRS never initiates contact via email, text or social media. In fact, it rarely makes a phone call to initiate conversation. Normally, you will get letters in the mail to initiate communication, and later certified mailings for subsequent communications. Always be aware before divulging your confidential information. Identity theft is real. 
3. Social media - fraudulent form filing or bad advice - Are you about to use some tax software? Just be sure it is IRS compliant.  The software may offer a fraudulent form or bad advice. You don't want to put your confidential information in some software only to find our your identity was compromised.
4. Spearphishing and cybersecurity - Emails pretending to be the IRS or the tax preparer with a malicious link. These emails look so real - and they are 100% not. Don't click on anything. And certainly don't reply with confidential data. Remember, the IRS never communicates via email. Our firm also prefers to talk to the taxpayer (so the identity can be verified) when doing business. 
5. Offer in Compromise Mills - Criminals know that you are in a vulnerable state, and they take advantage of you. Be warned. Those mills - and you've heard them on the radio all the time - promise to settle a huge tax debt with pennies on the dollar. Often, they take your money, and nothing if anything is done. Just be sure who you are dealing with. Be smart.
6. Employee Retention Credits - You are right to be suspicious when something seems too good to be true. Trust your first instinct. There were many programs rolled out during COVID by the IRS that were abused. The Paycheck Protection Program (PPP) was a popular program abused b;y many. The Employee Retention Credits (ERC) is another abused program. During COVID, the IRS like many other businesses was on a shoe-string budget. That's no longer the case. The IRS aims looks to go after promoters of the ERC and taxpayers themselves. 
7. Online account help from third-party scammers - Some have pretended to help taxpayers in creating IRS accounts, but instead use the confidential information to file fraudulent tax returns or open up loans or credit. Once again, identity theft is real.
8. False Fuel Tax Credit claims - The IRS has seen an increase in false claims for this particular credit. The IRS is going after preparers and promoters who sometimes earn higher fees because of this and the taxpayers who have benefited. 
9. Fake Charities - This seems simple enough to understand. Just don't go down this road!

High-income Filer Fraud (1):

1. Be aware of two schemes - The two schemes that you should be aware of are: 1) charitable remainder annuity trust (CRAT) and 2) monetized installment sales. Sometimes these arrangements are misused by promoters, advisors and taxpayers. Get a couple opinions.

Abusive Tax Avoidance (1):

1. Bogus tax avoidance strategies - Be aware before committing to: 1) micro-captive insurance arrangement or 2) syndicated conservation easements. The IRS is onto these schemes and promise to come hard on the taxpayer and any promoters of fraudulent arrangements.

International-related Schemes (1):

1. Schemes with international elements - 1) offshore accounts and digital assets and 2) Puerto Rican and foreign captive insurance (Puerto Rico is the new Virgin Islands, I suppose!)

* More information on any of the above Dirty Dozen List can be found at: https://www.irs.gov/newsroom/irs-wraps-up-2023-dirty-dozen-list-reminds-taxpayers-and-tax-pros-to-be-wary-of-scams-and-schemes-even-after-tax-season

You are probably paying more for your tax preparation than our rates. We are here to support you, and we won't let you down. Don't opt for an inferior product; your refund depends on it!​ Don't wait until you get all your forms.