It’s National Consumer Protection Week (Feb. 4-10) and the Better Business Bureau is joining with other national organizations and government agencies to encourage consumers to “Read Up, Reach Out and Be an Informed Consumer!”
This is particularly important as the tax filing deadline approaches. The BBB predicts that scam artists will try to take advantage of people’s confusion over newly-enacted tax breaks that went into effect after the 2007 tax filing forms were printed. Reaching out to the BBB, the IRS and other trustworthy organizations for credible information will help consumers to recognize tax scams, resist being defrauded and make educated tax-related decisions.
Following are a few of the tax schemes commonly advocated by unscrupulous promoters, according to the IRS:
- Zero Wages. Taxpayer is told to attach to their return a Form 4852 (Substitute Form W-2) or a “corrected” Form 1099 showing zero or very little wages or other income. The taxpayer indicates he or she is rebutting information submitted to the IRS by the employer.
- Zero Return. Promoter instructs taxpayer to enter all zeros on their income tax filing, or to enter zero income, report their withholding and then write “nunc pro tunc” (Latin for “now for then”) on their return. The taxpayer is told this will lead the IRS to disregard the original return on which they reported wages and other income.
- Tax Abatement. This scam rests on a faulty interpretation of the Internal Revenue Code and involves the tax filer using Form 843 to request abatement of previously assessed taxes.
- Misuse of Trusts. Taxpayer is encouraged to transfer assets into a trust to reduce income subject to tax, deductions for personal expenses and reduced estate or gift taxes. Be aware that some trusts do not deliver the promised tax benefits; the IRS is examining these arrangements.
- False Arguments. No one has the right to disobey tax laws! The following are false arguments used by shady promoters and thrown out of court: the 16th Amendment concerning Congressional power to lay and collect income taxes was never ratified; wages are not income; filing a return and paying taxes are voluntary acts; and, being required to file Form 1040 violates the 5th Amendment right against self-incrimination or the 4th Amendment right to privacy.
Those who do get involved with an illegal tax scheme may well face repayment of taxes, plus interest and penalties. Don’t let yourself be victimized. Before you do business with a tax adviser, heed the call of National Consumer Protection Week and “Read Up and Reach out!” Contact the BBB (www.bbb.org) to find out if the business is trustworthy. A legal or financial expert can also assist you in evaluating tax-related promotions or solicitations. Visit the IRS Web site (www.irs.gov) for additional information on tax fraud.