Beware of Scammers
The IRS Dirty Dozen list is an annual release that taxpayers eagerly await with the same enthusiasm as a dentist appointment. It’s a compilation of the year’s most egregious tax scams, and for 2024, it’s as colorful as ever. Let’s dive into the murky waters of tax evasion and emerge with our wallets—and our integrity—intact.
- Bogus Tax Avoidance Strategies: This year, the IRS warns against schemes with an international flair. Picture this: offshore accounts disguised as beach vacations, and tax shelters that are less ‘shelter’ and more ‘house of cards.
- Improper Art Donations: The wealthy are not immune to the siren call of dodgy deductions. Improper art donation deductions are the new ‘abstract expressionism,’ while charitable remainder annuity trusts and monetized installment sales are the financial equivalent of a Jackson Pollock splatter—messy and confusing.
- Spearphishing Extravaganza: Tax pros and businesses, beware! The IRS cautions against emails that are fishier than a sushi platter. These scams are like the ‘new client’ who turns out to be a Nigerian prince.
- Social Media Misadvisors: Taking tax advice from social media is akin to taking health advice from a candy wrapper. Inaccurate or misleading tax information is circulating faster than cat videos.
- Ghost Preparers: These are the tax preparers who vanish with your cash faster than a magician’s rabbit. The IRS urges taxpayers to avoid these apparitions at all costs.
- Fake Charities: In the wake of disasters, fake charities pop up like mushrooms after rain, exploiting taxpayer generosity. Don’t let your good intentions fund a scammer’s luxury car.
- Offer in Compromise Mills: These outfits claim they can negotiate your tax debt down to pennies on the dollar. In reality, they’re more likely to reduce your bank account than your tax bill.
- Fuel Tax Credit Fictions: Unless you’re operating a farm or a fleet of taxis, you probably don’t qualify for fuel tax credits. If someone says otherwise, they might as well be selling oceanfront property in Arizona.
- Online Account Setup Scams: If someone offers to help you set up an IRS online account, they might as well be asking for the keys to your financial kingdom. Guard your personal information like a dragon hoards gold.
- Employee Retention Credit Claims: Aggressive promoters might urge small businesses to make questionable claims. It’s like claiming your pet hamster as a dependent because he’s been a loyal companion during Zoom calls.
- Phishing and Smishing Scams: The IRS warns of a deluge of emails and texts trying to hook your sensitive information. Remember, the IRS won’t text you to say you’ve won a tax refund lottery.
- Monetized Installment Sales: These are structuring strategies that promise the elimination of recognizing gains from a large sale like a business. This is the typical one plus one equals three strategy. It sounds great, but the math does not work.
There are a few honorable mentions that we would add to list to be on the lookout for:
- Charitable LLC: Brought to the forefront by Mark Zuckerberg, the scammers have grabbed hold. Promising the ability to “give money” to charity but keeping and using it as you want. Of course, this minor problem gets solved with life insurance.
- Charitable Remainder Trust: A very legitimate structure, until the scammers take hold. A slight of hand trick that lets you keep the assets gifted to charity. Look for this one on the 2025 list.
- Equipment Rental Structures: It seems like the conservation easement folks found a new game. A convoluted financing structure that makes it look like you are in an active trade to gain immediate depreciation benefits. The benefits turn when and if the financing gets paid off, so the immediate benefits get mostly taken back if the approach stands.
The 2024 IRS Dirty Dozen list serves as a reminder that if something sounds too good to be true, it probably belongs on next year’s list. Stay vigilant, stay informed, and maybe next year, we’ll find tax scams have gone the way of the dodo—or at least the floppy disk. For a detailed description of each scam, please refer to the IRS official website. Remember, navigating tax mitigation is like a game of chess; it pays to think several moves ahead. Stay safe!
