The IRS has issued a warning for high-income taxpayers regarding various scams targeted at them as the end of tax season draws near. The IRS's latest warning is a continuation of its 'Dirty Dozen' series, 12 different types of tax scams.
The IRS's latest warning is a continuation of its"Dirty Dozen" series, which warns taxpayers of 12 different types of tax scams. The warning, issued on Friday, is aimed at high earners."The IRS remains concerned about abusive tax arrangements, and they remain a focal point for our enforcement efforts," said IRS Commissioner Danny Werfel."Taxpayers should beware of potentially abusive arrangements and promoters pushing them.
One of the scams taxpayers ought to know about involves charitable remainder trusts, which allow people to donate assets to charity and draw annual income either for life or for a specific time period. The IRS examines charitable remainder trusts to ensure they correctly report trust income and distributions to beneficiaries.
However, these can be misused by promoters, advisers, and taxpayers, who can try to eliminate either ordinary income or capital gain on the sale of property. When this happens, property with a fair market value in excess of its basis is transferred to a charitable remainder annuity trust. Due to this, the IRS warns taxpayers they are legally responsible for what is on their tax return, not the promoter who convinces them to sign on to a transaction.Another scam via transactions that taxpayers ought to be aware of involves monetized installment sales, in which promoters find taxpayers looking to defer the recognition of gain upon the sale of appreciated property.
These types of sales are advertised online, and the IRS recommends taxpayers carefully consider these types of sales before claiming any tax benefit from these sales. Taxpayers can take caution by reviewing any legal requirements and consulting with qualified advisers.
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