Identity theft has been an increasing crime and has impacted individual’s from a tax perspective. An individual may steal your identity when being hired and fail to have enough income tax withheld. The income is reported to the Internal Revenue Service on a W-2 but when you do not report the income on your 1040 Individual Income Tax Return, your return will not add up to what the IRS has on record. Thus, you are likely to receive a Notice of Deficiency from the Internal Revenue Service.
Telephone scams have been increasing recently. Individuals will call taxpayers pretending to be the Internal Revenue Service in an attempt to obtain information such as social security numbers and then steal an individual’s identity. If you receive a call from the Internal Revenue Service, you can always call the IRS back. The IRS can be reached at 1-800-829-1040 or other numbers that will be on their website.
Phishing scams may include emails and fake websites that appear to be legitimate. These scams are an attempt obtain personal and financial information such as social security numbers or bank information. It is important to know that the Internal Revenue Service does not contact taxpayers by email, text messages or any social media channels. Thus, any email from an agency purporting to be the IRS is a scam.
Promises of free money or a refund that appears high may be an indicator that your preparer is not being honest or accurate on your tax return. You are still responsible for the tax return that is being filed. Certain scams have also involved persons acting as tax return preparers, when in fact they are not. Remember, if it seems too good to be true, it probably is. You can always contact a tax attorney or CPA to discuss a tax return prepared by a third party.
Hiding income offshore has been under heavy investigation from the IRS recently. As an American citizen you are responsible to report world –wide income and financial accounts and assets abroad under the new FATCA regulations. Taxpayers who maintain financial accounts abroad and do not report these accounts and income from these accounts may face very high penalties and interest. The IRS has established the offshore voluntary disclosure program which taxpayers can use to lessen the penalties and disclose their foreign financial assets.
Taxpayers have also been duped into donating money to what they believed were charitable organizations. The taxpayers are contacted by people impersonating charities.
Claiming false income or expenses to receive certain tax credits or pay less tax is illegal and such actions could lead to fines, penalties and potentially criminal prosecution.
The use of abusive tax structures has increased in recent years. The schemes often involve sham businesses and inaccurate financial arrangements for the sole purpose of evading taxes. The scheme may have multiple layers in an attempt to conceal the reality of the situation and hide income and assets. The schemes may involve LLCs, partnerships, foreign accounts and other offshore financial institutions. Remember, if it seems too good to be true, it probably is. Contact a CPA or tax attorney if you an individual or company has made a proposal to you that will save you money in taxes and does not sound right.
Certain trusts may be used through estate planning to improperly reduce tax income and or inflate deductions. Again, it is best to contact a CPA, tax attorney or even an estate planning attorney if you are questioning a transaction that has been proposed to you.
You can contact a Denver tax attorney at The McGuire Law Firm if you have tax questions or issues. A tax attorney will be happy to discuss your questions and our goal is to educate you!
Contact The McGuire Law Firm to schedule a free consultation with a tax attorney! Offices in Denver and Golden Colorado.