TAX SCAMS AT-2006-24 -

David
Should i set up a trust?
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I am not even sure what country you are in but read NUMBER 1 in
the dirty dozen below.  Usually I would say NO!.
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This is as true for Canada as it is for the USA.  It seems that
every second call I get right now is for someone looking for a
miracle because of what they have heard from someone else, seen
and heard at meeting or been promised in an ad.  The only return
is a correct return.  Few people have any grey areas.
david ingram
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 IRS Tax Tips
      AT-2006-24
      February 3, 2006
      BEWARE OF TAX SCAMS
      IRS TAX TIP 2006-24
      Don’t fall victim to tax scams. These schemes take several
shapes, ranging from promises of large tax refunds to illegal
ways of “untaxing” yourself. If you think a promise of an
unusually large refund or a proposal to avoid taxes may be
unscrupulous report it to the IRS at 1-800-829-0433.
      Beware of these common schemes:
      Return Preparer Fraud:
      Dishonest tax return preparers can cause many headaches for
taxpayers who fall victim to their ploys. Such preparers derive
financial gain by skimming a portion of their clients’ refunds
and charging inflated fees for return preparation services. They
attract new clients by promising large refunds. Taxpayers should
choose carefully when hiring a tax preparer. As the saying goes,
if it sounds too good to be true, it probably is. No matter who
prepares your tax return you are ultimately responsible for its
accuracy and for any tax bill that may arise due to a
questionable claim.
      Identity Theft:
      It pays to be choosy when it comes to disclosing personal
information. Identity thieves have used stolen personal data to
access financial accounts, run up charges on credit cards and
apply for new loans. The IRS is aware of several identity theft
scams involving taxes or scammers posing as the IRS itself. The
IRS does not use e-mail to contact taxpayers about issues related
to their accounts. If you have any doubt whether a contact from
the IRS is authentic call 1-800-829-1040 to confirm it.
      Frivolous Arguments:
      Promoters have been known to make outlandish claims that
the Sixteenth Amendment concerning congressional power to
establish and collect income taxes was never ratified; that wages
are not income; that filing a return and paying taxes are merely
voluntary; and that being required to file Form 1040 violates the
Fifth Amendment right against self-incrimination or the Fourth
Amendment right to privacy. Don’t believe these or other similar
claims. Such arguments are false and have been thrown out of
court. Taxpayers have the right to contest their tax liabilities
in court but no one has the right to disobey the law.
      Three lessons to remember:
        a.. You are responsible and liable for the content of
your tax return.
        b.. Anyone who promises you a bigger refund without
knowing your tax situation could be misleading you, and
        c.. Never sign a tax return without looking it over to
make sure it is accurate.
      For more information about these and other tax scams visit
the IRS Web site at  www.IRS.gov.
         ======================================
         IRS Announces the 2005 Dirty Dozen
                    IR-2005-19, Feb. 28, 2005
                    WASHINGTON — The Internal Revenue Service
today unveiled its annual listing of notorious tax scams, the
“Dirty Dozen,” reminding taxpayers to be wary of schemes that
promise to eliminate taxes or otherwise sound too good to be
true.
                    The “Dirty Dozen” for 2005 includes several
new scams that either manipulate laws governing charitable
groups, abuse credit counseling services or rely on refuted
arguments to claim tax exemptions. The agency also sees the
continuing spread of identity theft schemes preying on people
through e-mail, the Internet or the phone, sometimes with con
artists posing as representatives of the IRS.
                    “The Dirty Dozen is a reminder that tax scams
can take many forms,” IRS Commissioner Mark W. Everson said. “Don
’t be fooled by false promises peddled by scam artists. They’ll
take your money and leave you with a hefty tax bill.”
                    Involvement with tax schemes can lead to
imprisonment and fines. The IRS routinely pursues and shuts down
promoters of these scams. But taxpayers should also remember that
anyone pulled into these schemes can face repayment of taxes plus
interest and penalties.
                    Persons who suspect tax fraud can call the
IRS at 1-800-829-0433.
                    The Dirty Dozen
                    The IRS urges people to avoid these common
schemes:
                      1.. Trust Misuse. Unscrupulous promoters
for years have urged taxpayers to transfer assets into trusts.
They promise reduction of income subject to tax, deductions for
personal expenses and reduced estate or gift taxes. However, some
trusts do not deliver the promised tax benefits, and the IRS is
actively examining these arrangements. More than two dozen
injunctions have been obtained against promoters since 2001, and
numerous promoters and their clients have been prosecuted. As
with other arrangements, taxpayers should seek the advice of a
trusted professional before entering into a trust.
                      2.. Frivolous Arguments. Promoters have
been known to make the following outlandish claims: that the
Sixteenth Amendment concerning congressional power to lay and
collect income taxes was never ratified; that wages are not
income; that filing a return and paying taxes are merely
voluntary; and that being required to file Form 1040 violates the
Fifth Amendment right against self-incrimination or the Fourth
Amendment right to privacy. Don’t believe these or other similar
claims. Such arguments are false and have been thrown out of
court. While taxpayers have the right to contest their tax
liabilities in court, no one has the right to disobey the law.
                      3.. Return Preparer Fraud. Dishonest return
preparers can cause many headaches for taxpayers who fall victim
to their ploys. Such preparers derive financial gain by skimming
a portion of their clients’ refunds and charging inflated fees
for return preparation services. They attract new clients by
promising large refunds. Taxpayers should choose carefully when
hiring a tax preparer. As the saying goes, if it sounds too good
to be true, it probably is. No matter who prepares the return,
the taxpayer is ultimately responsible for its accuracy. Since
2002, the courts have issued injunctions ordering dozens of
individuals to cease preparing returns, and the Department of
Justice has filed complaints against dozens of others, which are
pending in court.
                      4.. Credit Counseling Agencies. Taxpayers
should be careful with credit counseling organizations that claim
they can fix credit ratings, push debt payment agreements or
charge high fees, monthly service charges or mandatory
“contributions” that may add to debt. The IRS Tax Exempt and
Government Entities Division has made auditing credit counseling
organizations a priority because some of these tax-exempt
organizations, which are intended to provide education to
low-income customers with debt problems, are charging debtors
large fees, while providing little or no counseling.
                      5.. "Claim of Right" Doctrine. In this
scheme, a taxpayer files a return and attempts to take a
deduction equal to the entire amount of his or her wages. The
promoter advises the taxpayer to label the deduction as “a
necessary expense for the production of income” or “compensation
for personal services actually rendered.” This so-called
deduction is based on a misinterpretation of the Internal Revenue
Code and has no basis in law.
                      6.. “No Gain” Deduction. Similar to “Claim
of Right,” filers attempt to eliminate their entire adjusted
gross income (AGI) by deducting it on Schedule A. The filer lists
his or her AGI under the Schedule A section labeled “Other
Miscellaneous Deductions” and attaches a statement to the return,
referring to court documents and including the words “No Gain
Realized.”
                      7.. Corporation Sole. Since September 2004,
the Department of Justice has obtained six injunctions against
promoters of this scheme and filed complaints against 11 others.
Participants apply for incorporation under the pretext of being a
“bishop” or “overseer” of a one-person, phony religious
organization or society with the idea that this entitles the
individual to exemption from federal income taxes as a nonprofit,
religious organization. When used as intended, Corporation Sole
statutes enable religious leaders to separate themselves legally
from the control and ownership of church assets. But the rules
have been twisted at seminars where taxpayers are charged fees of
$1,000 or more and incorrectly told that Corporation Sole laws
provide a “legal” way to escape paying federal income taxes,
child support and other personal debts.
                      8.. Identity Theft. It pays to be choosy
when it comes to disclosing personal information. Identity
thieves have used stolen personal data to access financial
accounts, run up charges on credit cards and apply for new loans.
The IRS is aware of several identity theft scams involving taxes.
In one case, fraudsters sent bank customers fictitious
correspondence and IRS forms in an attempt to trick them into
disclosing their personal financial data. In another, abusive tax
preparers used clients’ Social Security numbers and other
information to file false tax returns without the clients’
knowledge. Sometimes scammers pose as the IRS itself. Last year
the IRS shut down a scheme in which perpetrators used e-mail to
announce to unsuspecting taxpayers that they were “under audit”
and could set matters right by divulging sensitive financial
information on an official-looking Web site. Taxpayers should
note the IRS does not use e-mail to contact them about issues
related to their accounts. If taxpayers have any doubt whether a
contact from the IRS is authentic, they can call 1-800-829-1040
to confirm it.
                      9.. Abuse of Charitable Organizations and
Deductions. The IRS has observed an increase in the use of
tax-exempt organizations to improperly shield income or assets
from taxation. This can occur, for example, when a taxpayer moves
assets or income to a tax-exempt supporting organization or
donor-advised fund but maintains control over the assets or
income, thereby obtaining a tax deduction without transferring a
commensurate benefit to charity. A “contribution” of a historic
facade easement to a tax-exempt conservation organization is
another example. In many cases, local historic preservation laws
already prohibit alteration of the home’s facade, making the
contributed easement superfluous. Even if the facade could be
altered, the deduction claimed for the easement contribution may
far exceed the easement’s impact on the value of the property.
                      10.. Offshore Transactions. Despite a
crackdown on the practice by the IRS and state tax agencies,
individuals continue to try to avoid U.S. taxes by illegally
hiding income in offshore bank and brokerage accounts or using
offshore credit cards, wire transfers, foreign trusts, employee
leasing schemes, private annuities or life insurance to do so.
The IRS, along with the tax agencies of U.S. states and
possessions, continues to aggressively pursue taxpayers and
promoters involved in such abusive transactions.
                      11.. Zero Return. Promoters instruct
taxpayers to enter all zeros on their federal income tax filings.
In a twist on this scheme, filers enter zero income, report their
withholding and then write “nunc pro tunc”–– Latin for “now for
then”––on the return.
                      12.. Employment Tax Evasion. The IRS has
seen a number of illegal schemes that instruct employers not to
withhold federal income tax or other employment taxes from wages
paid to their employees. Such advice is based on an incorrect
interpretation of Section 861 and other parts of the tax law and
has been refuted in court. Recent cases have resulted in criminal
convictions, and the courts have issued injunctions against more
than a dozen persons ordering them to stop promoting the scheme.
Employer participants can also be held responsible for back
payments of employment taxes, plus penalties and interest. It is
worth noting that employees who have nothing withheld from their
wages are still responsible for payment of their personal taxes.
                    Other Scams Still Lingering
                    The IRS removed four scams from the Dirty
Dozen this year: slavery reparations, improper home-based
businesses, the Americans with Disabilities Act and EITC
dependent sharing. The agency has noticed declines in activity in
some of these schemes. But taxpayers should remain wary because
the IRS has seen old scams resurface or evolve.
                    Moreover, the IRS reminds taxpayers to be
vigilant about cons that may not be on the Dirty Dozen list. New
tax scams or schemes routinely pop up, especially around tax
time.
                    Links:
                      a.. Criminal Enforcement — Fraud Alerts
                      b.. Identity Theft
                      c.. Publication 2193, Trusts used in Tax
Schemes (PDF 239K)
                      d.. Fact Sheet — Tips on Choosing a
Preparer:
                      e.. The Truth About Frivolous Tax Arguments
(PDF 392K)
                      f.. Publication 2105, Why Do I Have to Pay
Taxes? (PDF 465K)
                      g.. IRS Urges Care When Seeking Help from
Credit Counseling Agencies
                      h.. IRS Takes Steps to Ensure Credit
Counseling Organizations Comply with Requirements for Tax Exempt
Status
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              David Ingram's US/Canada Services
              US / Canada / Mexico tax, Immigration and working
Visa Specialists
              US / Canada Real Estate Specialists
              Home office at:
              4466 Prospect Road
              North Vancouver,  BC, CANADA, V7N 3L7
              Cell (604) 657-8451 -
              (604) 980-0321 Fax (604) 980-0325
              Calls welcomed from 10 AM to 10 PM 7 days a week
(please do not fax or phone outside of those hours as this is a
home office)
              email to taxman at centa.com
              www.centa.com www.david-ingram.com
              Disclaimer:  This question has been answered
without detailed information or consultation and is to be
regarded only as general comment.   Nothing in this message is or
should be construed as advice in any particular circumstances. No
contract exists between the reader and the author and any and all
non-contractual duties are expressly denied. All readers should
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              Be ALERT,  the world needs more "lerts"
               David Ingram expert income tax help and
preparation of US Canada Mexico non-resident and cross border
returns with rental dividend wages self-employed and royalty
foreign tax credits
              David Ingram specializes in giving expert income
tax and immigration help to American and Canadian citizens living
out of their home countries from Zimbabwe to Saudi Arabia to
Mexico to China or Chile - Cross border, Non-resident - dual
citizen - out of country investments are all handled with
competence and authority.
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