Orange County Register

Phishing, the Internet scheme to steal personal financial information, tops the Internal Revenue Service’s list of the ‘Dirty Dozen’ tax scams for 2008.  For more advice about phishing Click here.

“Taxpayers should be wary of scams and promises to avoid paying taxes that seem too good to be true,” says acting IRS Commissioner Linda Stiff. “There is no secret formula that can eleminate a person’s tax obligations. People should be wary of anyone peddling any of these scams.”

Here are the other 11:

• Scams related to the economic stimulus payment. Eligible individuals just have to file a tax return to get the rebate.
• Advice that encourage people to make unreasonable or unfounded claims to avoid paying taxes. The IRS has a whole list of frivolous claims and if you use one of them, you’re subject to a $5,000 fine.
• Fuel tax credit. Some people are unreasonably claiming nontaxable use of gasoline that is reserved for farmers and others who use fuel for off-highway business purposes.
• Hiding income offshore to avoid paying U.S. taxes
• Abusive retirement plans including Roth Individual Retirement Arrangements. Be wary of tax advisers who encourage you to shift appreciated assets into Roth IRAs.
• Zero wages. Typically a Form 4852 (substitute Form W-2) or a “corrected” Form 1099 is used to improperly reduce taxable income to zero.
• False claims for refund and requests for abatement
• Return preparer fraud. Dishonest tax return preparers make money by skimming a portion of clients’ refunds or charging inflated fees for services.
• Disguised corporate ownership. Some create shell corporations to disguise the ownership of a business or financial activity and then use the anonymous entity to underreport income.
• Misuse of trusts
• Abuse of charitable organizations and deductions. Misuse includes arrangements to improperly shield income or assets from taxation, attemps by donors to maintain control over donated assets and over-valuing contributed property.

If you have a tip, resource or strategy to help small businesses, send it to jnorman@ocregister.com. If I use it, I’ll give you credit and link to your Web site.

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