Industry Tips
Don't Fall Victim to Tax Reduction Schemes!
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.
