Newspaper article THE JOURNAL RECORD

Commentary: Beware of Tax Scams

Newspaper article THE JOURNAL RECORD

Commentary: Beware of Tax Scams

Article excerpt


With April 15 just a few weeks away, many American small business owners are already looking at ways to save money on next year's taxes. While there may be ways to legitimately reduce your business tax burden, small business owners should be alert to attractive but illegal tax schemes.
The U.S. Small Business Administration's Office of Advocacy states that each year at tax time, con artists shamelessly take advantage of people by charging outlandish fees for their illegal tax dodges. Below are examples of "too good to be true" schemes the office warns against.
l Put your money in a trust and never pay taxes again.
Scam artists promote fraudulent foreign and domestic trusts as a means to protect assets and evade taxes. They usually target wealthy individuals, small business owners, or high-end wage earners, and may charge from $5,000 to $7,000 for "trust" packages.
The fee enables taxpayers to have trust documents prepared, to use foreign and domestic trustees as offered by promoters, and to use foreign bank accounts and corporations.
Two arrangements that are frequently offered are business trusts and equipment or service trusts.
Although these schemes give the appearance of the separation of responsibility and control from the benefits of ownership, they are in fact controlled and directed by the taxpayer. A legitimate trust is a form of ownership that completely separates responsibility and control of assets from all of the benefits of ownership.
l Improper home-based business.
This scheme purports to offer tax "relief" but in reality is illegal tax avoidance. The promoters of these schemes 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.
l No taxes being withheld from wages.
Some illegal schemes instruct employers not to withhold federal income tax or employment taxes from wages paid to their employees. These schemes are based on an incorrect interpretation of tax law and have been refuted in court. …

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