[Chat] Fw: IRS E-News For District of Columbia Tax Professionals-se-dc

[Brad Schlegel]

Some good items in here!!

Brad
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From: <district-of-columbia at lists.qai.irs.gov>
To: "News For Tax Professionals in The District Of Columbia"
<district-of-columbia at lists.qai.irs.gov>
Sent: Wednesday, February 26, 2003 4:23 PM
Subject: IRS E-News For District of Columbia Tax Professionals-se-dc


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District of Columbia e-news for Tax Professionals
Internal Revenue Service
February 26, 2003
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IRS UPDATES THE 'DIRTY DOZEN' FOR 2003:
AGENCY WARNS OF 12 COMMON SCAMS

WASHINGTON - In an update of an annual consumer alert, the Internal
Revenue Service urged taxpayers to avoid falling victim to one of the
"Dirty Dozen" tax scams. In the new 2003 ranking, several new scams
have reached the top of the consumer watch list, including offshore
banking and identity theft schemes.

"With the tax season in full swing, we're seeing the traditional upswing
in tax trickery," said IRS Acting Commissioner Bob Wenzel. "Year after
year, con artists across the nation try pulling a fast one on honest
taxpayers with different types of miracle tax solutions.  Don't be
fooled by the 'Dirty Dozen' and other misleading scams. There is no
secret way to get out of paying taxes."

The IRS and other federal agencies are aggressively pursuing and
successfully prosecuting promoters of these schemes and many of
their clients for fraud and tax evasion. These can result in
imprisonment, fines and repayment of taxes owed with interest and
penalties. Even innocent taxpayers involved in these schemes can
face a staggering amount of back interest and penalties.

Taxpayers who suspect tax fraud can report it to the IRS at
1-800-829-0433. More information on tax scams and schemes is
available by visiting "The Newsroom" section of IRS.gov.

The IRS urges people to avoid these common schemes:

1. OFFSHORE TRANSACTIONS. Some people use offshore transactions to
avoid paying United States income tax. Use of an offshore credit card,
trust or other arrangement to hide or underreport income or to claim
false deductions on a federal tax return is illegal.

Through April 15, the IRS is offering people with improper offshore
financial arrangements a chance to make things right. Eligible
taxpayers who step forward will not face civil fraud and information
return penalties. A taxpayer involved in these schemes who does not
come forward now, however, will be subject to payment of taxes,
interest, penalties and potential criminal prosecution.

People interested in participating in the program, called the
Offshore Voluntary Compliance Initiative, can contact the IRS by
calling 215-516-3537 (not toll-free).

2. IDENTITY THEFT. Identity thieves use someone's personal data to
steal his or her financial accounts, run up charges on the victim's
existing credit cards, apply for new loans, credit cards, services or
benefits in the victim's name and even file fraudulent tax returns.

The IRS is aware of at least two recent identity theft scams
involving taxes or the IRS. In one, tax preparers allegedly used
information, such as Social Security numbers and financial information,
from their clients' tax returns to commit identity theft. In another,
fraudsters sent bank customers fictitious bank correspondence and IRS
forms in an attempt to trick them into disclosing their personal and
banking data.

For taxpayers, it pays to be choosy about disclosing personal and
financial information. And the IRS encourages taxpayers to carefully
select a reputable tax professional.

3. PHONY TAX PAYMENT CHECKS. In this scheme, con artists sell
fictitious financial instruments that look like checks to pay a tax
liability, mortgage and other debts. The con artists may also counsel
their clients to use a phony check to overpay their taxes so they can
receive a refund from the IRS for the overpayment. The false checks,
called sight drafts, are worthless and have no financial value. It is
illegal to use these sight drafts to pay a tax liability or other debts.

4. AFRICAN-AMERICANS GET A SPECIAL TAX REFUND. Thousands of African?
Americans have been misled by people offering to file for tax credits
or refunds related to reparations for slavery. There is no such
provision in the tax law. Some unscrupulous promoters have encouraged
clients to pay them to prepare a claim for this refund. But the claims
are a waste of money. Promoters of reparations tax schemes have been
convicted and imprisoned. And taxpayers could face a $500 penalty for
filing such claims if they do not withdraw the claim.

In early 2002, the slavery reparations scam ranked as the No. 1 scheme
on the Dirty Dozen list. Following a sweeping public outreach campaign
and assistance from members of the Congressional Black Caucus and other
organizations, the number of reparation scam claims fell sharply. Tens
of thousands of claims were received in 2001, but the claims fell to
less than 50 per week in 2002.

5. NO TAXES WITHHELD FROM WAGES. Illegal schemes are being promoted
that instruct employers not to withhold federal income tax or employment
taxes from wages paid to their employees. These schemes are based on an
incorrect interpretation of tax law and have been refuted in court. A
recent flurry of court actions has been taken against promoters of these
schemes. Taxpayers who have concerns about their employer and employment
taxes can get help by calling the IRS at 1-800-829-1040.

6. IMPROPER HOME-BASED BUSINESS. This scheme purports to offer tax
"relief" but in reality is illegal tax avoidance. The promoters of this
scheme claim that individual taxpayers can deduct most, or all, of their
personal expenses as business expenses by setting up a bogus home-based
business. But the tax code firmly establishes that a clear business
purpose and profit motive must exist in order to generate and claim
allowable business expenses.

7. PAY THE TAX, THEN GET THE PRIZE. The caller says you've won a prize,
and all you have to do to get it is to pay the income tax due. Don't
believe it. Someone who really wins a prize may need to make an estimated
tax payment to cover the taxes that will be due at the end of the year.
But the payment goes to the IRS - not the caller. Whether the prize is
cash, a car or a trip, a legitimate prize giver generally sends both the
winner and the IRS a Form 1099 showing the total prize value that should
be reported on the winner's tax return.

8. FRIVOLOUS ARGUMENTS. Frivolous arguments are false arguments that
are unsupported by law.  When a scheme promoter says "I don't pay taxes -
why should you" or urges you to "untax yourself for $49.95," beware. These
scams are as old as snake oil, but people continue to be taken in. And
now they're on the Internet. The ads may say that paying taxes is
"voluntary," but that's just plain wrong. The U.S. courts have
continuously rejected this and other frivolous arguments. Unfortunately,
hundreds of people across the country have paid for the "secret" of not
paying taxes or have bought "untax packages." Then they find out that
following the advice contained in
them can result in civil and/or criminal penalties. Numerous sellers of
the bogus schemes have been convicted on criminal tax charges.

9. SOCIAL SECURITY TAX SCHEME. Taxpayers shouldn't fall victim to a
scam offering refunds of the Social Security taxes they have paid
during their lifetimes. The scam works by the victim paying a
"paperwork" fee of $100, plus a percentage of any refund received, to
file a refund claim with the IRS. This hoax fleeces the victims for the
up-front fee. The law does not allow such a refund of Social Security
taxes paid. The IRS processing centers are alert to this hoax and have
been stopping the false claims.

10. "I CAN GET YOU A BIG REFUND...FOR A FEE!" Refund scheme operators
may approach someone wanting to "borrow" their Social Security number
or give him or her a phony W-2 so it appears that the person qualifies
for a big refund. They may promise to split the refund with that
person, but the IRS catches most of these false refund claims before
they go out. And when one does go out, the participant usually ends up
paying back the refund along with stiff penalties and interest. Two
lessons to remember: 1) Anyone who promises someone a bigger refund
without knowing their tax situation could be misleading them, and 2)
Never sign a tax return without looking it over to make sure it's
honest and correct.

11. SHARE/BORROW EITC DEPENDENTS. Unscrupulous tax preparers "share"
one client's qualifying children with another client in order to allow
both clients to claim the Earned Income Tax Credit. For example, one
client may have four children but only needs to list two to get the
maximum EITC. The preparer will list two children on the first
client's return and the other two on another client's tax return. The
preparer and the client "selling" the dependents split a fee. The IRS
prosecutes the preparers of such fraudulent claims, and participating
taxpayers could be subject to civil penalties.

12. IRS "AGENT" COMES TO YOUR HOUSE TO COLLECT. First, do not let
anyone into your home unless they identify themselves to your
satisfaction.
IRS special agents, field auditors and collection officers carry picture
IDs and will normally try to contact you before they visit. If you think
the person on your doorstep is an impostor, lock your door and call the
local police. To report IRS impostors, call the Treasury Inspector
General's Hotline at 1?800?366?4484.

Beyond the "Dirty Dozen," the IRS sees many more tax schemes. Some
examples include home-based business scams, disabled access credit for
pay phones and a variety of improper abusive trusts.

"The best advice for taxpayers is to remember the concept of 'buyer
beware,'" Wenzel said. "Think carefully before paying for services or
signing important documents. And don't be fooled by outrageous promises.
If something sounds too good to be true, it probably is."

 IRS HOLDS MEETING ON RESTAURANT AND BAR TIP REPORTING

The Internal Revenue Service will hold a meeting on Wednesday,
April 2, 2003 to discuss tip reporting and the tax responsibilities of
employees and employers in restaurants and drinking establishments.
The meeting will be held at the Treasury Executive Institute, 801 9th St.
NW, Washington D.C. at 9:00 a.m.

In 1994, the IRS met with industry representatives and developed several
voluntary programs to encourage accurate tip reporting.  Despite these
existing programs, a significant amount of tip income remains
unreported.  In June 2002, the Supreme Court affirmed in the case of
United States vs. Fior D'Italia that the IRS can impose employer-only
assessments of unpaid employment taxes on tips.  While the Court
sustained the IRS' authority to perform these audits, the IRS is
interested in continuing its long-held successful dialogue with the
food and beverage industry.

As part of this process, the IRS is seeking taxpayer input to help
increase participation and compliance in existing tip programs as well
as suggestions for new approaches that will simplify the taxpayer burden
associated with tip reporting.  The IRS is also interested in current tip
practices and the electronic collection of data.

If you would like to attend the meeting, please contact Christine
Williams or Sandy Cyze at 630-493-5812 by March 14, 2003.  Due to space
limitations, reservations are required

Written comments can be mailed to the IRS, Taxpayer Education and
Communications Area Director at 2001 Butterfield Rd., Suite 1301,
Downers Grove, IL 60515 or via e-mail to Leonard.n.hall at irs.gov.
Comments are due by March 14, 2003.


Thank you for subscribing to e-News For Tax Professionals in The District Of
Columbia, an IRS e-mail service.

If you wish to leave a tax law comment, please go to
http://www.irs.gov/taxlaw/.

If you have a specific concern about your tax situation, call
IRS CUSTOMER SERVICE AT 1-800-829-1040.

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