Each year the Internal Revenue Service ranks the most common scams people may face when they do their taxes. The IRS says these ‘Dirty Dozen,’ which range from identity theft to “free money”, peak during filing season.
No. 12: Misuse of trusts
The IRS described the potential pitfalls of a trust this way: “Such trusts rarely deliver the tax benefits promised and are used primarily as a means of avoiding income tax liability and hiding assets from creditors, including the IRS.”
No. 11: Disguised corporate ownership
The IRS says “third parties are improperly used to request employer identification numbers and form corporations that obscure the true ownership of the business.” Fraudsters can then use these entities to facilitate illegal activity such as money laundering.
No. 10: Abuse of charitable organizations and deductions
The IRS says it sometimes sees deliberate abuse of 501(c)(3) organizations, “including arrangements that improperly shield income or assets from taxation and attempts by donors to maintain control over donated assets or the income from donated property.”
No. 9: Falsely claiming zero wages
The IRS says that some schemers file a Form 4852 or a “corrected” Form 1099 to minimize their taxable income. The agency says that sometimes the perpetrator might argue in this scam that a company has refused to issue him or her a corrected Form W-2 “for fear of IRS retaliation.”