The IRS released its 2015 “Dirty Dozen” list of tax scams and abuses earlier this week. The list highlights popular abuses, scams and fraudulent endeavors by individuals. The list includes 1) Phone Scams, 2) Phishing, 3) Identity Theft, 4) Return Preparer Fraud, 5) Offshore Tax Avoidance, 6) Inflated Refund Claims, 7) Fake Charities, 8) Hiding Income with Fake Documents, 9) Abusive Tax Shelters, 10) Falsifying Income to Claim Credits, 11) Excessive Claims for Fuel Tax Credits, 12) Frivolous Tax Arguments.
With this list, the IRS emphasized hazards presented by telephone scams under which scam artists impersonating IRS agents urge taxpayers to make payments to them immediately. These calls have been occurring for months and often target new immigrants, the elderly and those with English as a second language. Scammers claim to be IRS agents and alter their caller ID numbers to make it seem as if the IRS is calling. They generally use scare tactics to demand immediate payment.
A second big issue on the list is the use of abusive tax shelters. Specifically, for the first time ever, the IRS has placed abuses of micro captive insurance companies on the list. These micro captives allow companies to self-insure themselves while also being able to deduct payments to the micro captive. The micro captive in turn is only taxed on its investment income, and not the premiums it receives. While micro captives can be legitimate and powerful tools for small businesses to acquire legitimate insurance, they are often times abused by taxpayers who primarily seek to gain tax benefits with insurance as a secondary purpose. These taxpayers are often lured into such schemes by promoters who help companies create captive insurance companies.